i  I3STORY-  OF  -  VIRGINIA. 
BANKS-AND-BANKING 
—  PRIOR- TO -THE 


LIBRARY 

UNIVERSITY  OP 
CALIFORNIA 

SAN  DIEGO 


THE  UNIVERSITY  LIBRARY 

UNIVERSITY  OF  CALIFORNIA,  SAN  DIEGO 

LA  JOLLA,  CALIFORNIA 


CREDU 

P.  0.  Box  657,  Richmond,  V*. 


A  HISTORY  OF  VIRGINIA  BANKS  AND 
BANKING  PRIOR  TO  THE  CIVIL  WAR 


A  History  of  Virg! 
Banks  and  Banking 
Prior  to  the  Civil,  War 


WITH  AN  ESSAY  ON  THE 
BANKING   SYSTEM  NEEDED 


BY 


WILLIAM   L.  ROYALL 


NEW  YORK  AND  WASHINGTON 
THE  NEALE  PUBLISHING  COMPANY 

1907 


COPYRIGHT,  1907,  BY 
THE  HEALE  PUBLISHING  COMPANY 


I  dedicate  this  Book  to  the  Banks  and  Bankers 
of  the  United  States,  who,  if  left  alone,  would  supply 
the  country  with  an  abundance  of  Sound  Currency. 


PREFACE 

The  Constitution  of  the  United  States,  which 
provided  for  this  country  the  true  system  of 
finance,  contemplated  that  the  Government  of  the 
United  States  should  coin  the  precious  metals 
into  money  and  regulate  the  value  thereof,  and 
this  was  to  be  the  only  money  the  country  was 
to  have,  except  foreign  coins,  the  value  of  which 
Congress  would  fix.  The  United  States  Gov- 
ernment was  to  make  such  issues  of  paper  cur- 
rency as  it  chose  to  issue  (not  legal  tender,  how- 
ever), and  agencies  of  the  States  were  to  issue 
such  paper  currency  as  the  States  would  allow 
(not  legal  tender).  We  operated  under  this  sys- 
tem until  the  civil  war  came  on,  and  when  that 
event  occurred  we  were  fast  working  down  to  a 
bearing;  and  though  somewhat  retarded  by  the 
"wild  and  woolly  West"  with  its  endless  succes- 
sion of  "wild-cat"  bank  issues,  we  would  long 
before  this  have  finally  and  firmly  established  the 
true  financial  system  if  there  had  been  no  civil 
war.  But  that  cataclysm  upset  everything  and 
finally  terminated  with  the  Supreme  Court  of  the 
United  States  declaring  that  Congress  could 


PREFACE 


make  a  piece  of  green  paper  bearing  an  indefinite 
promise  to  pay  a  dollar,  that  dollar  itself;  a  thing 
that  the  Almighty  alone  could  do,  and  even  He 
would  have  to  change  the  laws  of  the  universe 
before  He  could  accomplish  it. 

This  doctrine  has  resulted  in  the  people  of  the 
United  States  becoming  so  wedded  to  the  idea 
of  a  paper  dollar  good  all  over  the  country  that  it 
would  be  idle  for  a  writer  to  attempt  to  stem  that 
current.  The  wise  man,  instead  of  attempting 
the  impossible,  deals  with  conditions  as  he  finds 
them,  and  though  our  financial  system  is  all 
wrong  theoretically,  yet  it  is  possible  to  make  it 
subserve  our  purposes  in  practice.  The  follow- 
ing pages  are  devoted  to  an  effort  to  so  modify 
our  present  financial  system  as  to  make  it  sub- 
serve the  necessities  of  the  people. 

WILLIAM  L.  ROYALL.* 


CHAPTER  I 

Banking,  according  to  modern  methods,  did 
not  exist  in  Virginia  prior  to  the  year  1804. 
During  all  the  Colonial  period  and,  even  more 
so,  after  the  Revolution,  voluntary  associations, 
called  unchartered  banks,  did  a  banking  business, 
including  the  issue  of  currency  notes.  In  the 
early  part  of  the  nineteenth  century  this  busi- 
ness had  become  a  very  extensive  one,*  and  the 
unchartered  banks  operated  all  over  the  State; 
but  they  rested  entirely  on  individual  effort,  and 
the  State  had  no  part  or  lot  in  them.  It  would 
be  as  unprofitable  now  to  follow  them  in  the 
details  of  their  operations  as  it  would  be  to  record 
the  battles  of  the  Kites  and  the  Crows,  from 
which  John  Milton  turned  with  such  disgust. 

In  1804  the  legislature  began  passing  a  series 
of  acts  intended  to  force  those  unchartered  banks 
to  cease  doing  business,*  and  by  1820  they  had 
generally  wound  up  and  ended  their  operations. 

In  1804  the  legislature  chartered  the  Bank  of 
Virginia  and  its  branches,*  and  this  was  the 
beginning  of  the  Virginia  banking  system  that 
by  1860  had  grown  and  developed  into  the  most 
perfect  banking  system  that  the  world  has  ever 
seen. 

*Wilson  vs.  Spencer,  I   Rand.  Rep.  84-85. 
tRev.  Code,  1819,  Ch.  2,  p.  in;  where  a  reference  to  all 
of  the  acts  can  be  seen. 

tRev.  Code,  1819,  Ch.  2,  p.  67. 


10  VIRGINIA  BANKS  AND  BANKING 

The  scheme  of  the  Bank  of  Virginia's  charter 
did  not  contemplate  the  establishment  of  one 
bank  with  authority  to  it  to  establish  branches  at 
particular  places.  The  idea  was  that  there 
should  be  a  bank  with  a  capital  of  $1,500,000, 
divided  into  shares  of  $100  each,  and  that  an 
office  should  be  opened  at  Richmond  for  the  sub- 
scription by  citizens  of  Richmond  to  3.750  shares, 
and  that  one  should  be  opened  at  Norfolk  for  the 
subscription  by  citizens  of  Norfolk  to  3,000,  that 
an  office  should  be  opened  at  Petersburg  for  the 
subscription  by  citizens  of  Petersburg  to  2,250 
shares,  and  that  the  same  should  be  done  at  Fred- 
ericksburg  for  1,500  shares,  at  Winchester  for  525 
shares,  at  Staunton  for  450  shares,  at  Lynchburg 
for  525  shares ;  and  that  there  should  be  a  presi- 
dent and  board  of  directors  for  the  management 
of  the  Central  Bank  at  Richmond,  and  a  presi- 
dent and  board  of  directors  at  each  of  the 
branches  for  the  management  of  the  affairs  of 
each  branch.  It  will  thus  be  seen  that  it  was  one 
great  bank,  having  offices  at  a  number  of  places, 
the  office  at  each  place  getting  its  resources  from 
the  people  of  that  place  and  being  managed  by 
them;  and  that  a  stockholder  at  Lynchburg,  for 
instance,  was  not  a  stockholder  of  the  Lynchburg 
branch,  but  a  stockholder  in  the  great  Bank  of 
Virginia  that  spread  its  tentacles  all  over  the 
State. 


PRIOR  TO  THE  CIVIL  WAR  11 

It  was  provided  in  the  charter  that  as  soon  as 
enough  stock  was  subscribed  for  by  individuals 
to  make  it  certain  that  the  bank  would  be  organ- 
ized, the  State  was  to  subscribe  for  3,000  shares. 
The  bank  was  given  authority  to  issue  notes,  but 
they  were  not  to  exceed  $4,500,000  above  the 
amount  of  its  deposits,  and  its  notes  were  to  be 
received  in  payment  of  all  taxes  due  the  State. 

This  bank  immediately  went  into  operation, 
and  had  a  career  of  unbroken  success  until 
destroyed  by  the  civil  war.  Tempted  by  the 
success  of  the  Bank  of  Virginia  and  its  branches, 
in  1812  other  parties  got  a  charter  for  the 
Farmers  Bank  of  Virginia,  with  its  branches.* 
This  was  to  have  a  capital  of  $2,000,000,  divided 
into  shares  of  $100  each,  and  the  State  was  to 
subscribe  for  $334,000  of  the  stock. 

The  charter  of  this  bank  was  almost  identical 
with  that  of  the  Bank  of  Virginia.  The  Central 
Branch  at  Richmond  had  $416,600  of  the  capital, 
Norfolk  had  the  same.  Lynchburg  had  $166.600, 
Winchester  the  same;  Petersburg  had  $208,300, 
Fredericksburg  $166,600,  Staunton  $125,300. 
The  bank  was  authorized  to  issue  notes,  but  these 
were  never  to  exceed  $6,000,000  over  and  above 
its  deposits,  and  they  were  to  be  received  in  pay- 
ment of  all  dues  to  the  State. 

This  bank  immediately  commenced  business, 
and  had  a  most  successful  career  until  it  was 
destroyed  by  the  civil  war.  The  success  of  these 

*Rev.  Code,  1819,  Ch.  2,  p.  82. 


12  VIRGINIA  BANKS  AND  BANKING 

two  banks  and  their  branches  caused  the  business 
to  grow  in  favor,  and  several  more  banks  with 
branches  were  chartered  from  time  to  time; 
notable  amongst  which  was  the  Exchange  Bank 
of  Virginia,  with  a  capital  of  $3,000,000  and 
branches  in  many  parts  of  the  State.  An  account 
of  the  chartering  of  all  the  banks  that  existed  in 
the  State  in  1860  may  be  seen  in  the  Code  of 
1860,  page  338,  note  to  chapter  58,  section  i. 

I  do  not  propose  to  follow  the  operations  of 
Virginia's  banks  in  detail  from  1804  to  1860. 
The  United  States  was  a  new  country,  growing 
in  that  time  to  adolescence.  There  was  at  the 
beginning  but  little  accumulated  capital;  each 
section  had  to  devise  its  own  banking  system, 
with  but  little  in  history  to  guide  it,  and  the  long 
period  of  ups  and  downs  and  financial  panics  and 
disasters  that  the  country  had  to  go  through  as  a 
whole,  and  each  section  separately,  is  not  at  all 
to  be  wondered  at. 

Virginia's  experience  in  the  period  between 
1804  and  1860  was  the  experience  of  all  the 
other  States.  There  were  suspensions  of  specie 
payment  and  then  resumptions,  panics  succeeded 
by  calms,  and  days  of  prosperity  after  days  of 
disaster;  and  generally  Virginia  had  the  same 
sort  and  kind  of  experience  that  her  sister  States 
had.  But  her  people  were  waxing  wise  through 
it  all,  and  in  the  end  they  worked  out  a  most 
admirable  system. 

There  would  be  but  small  profit  in  following 
the  operations  of  Virginia's  banks  through  this 


PRIOR  TO  THE  CIVIL  WAR  13 

long  period  of  change  and  vacillation  when  her 
system,  as  it  ultimately  developed,  was  being 
worked  out.  What  we  want  is  to  see  the  system 
in  its  flower  and  to  see  how  it  then  suited  the 
needs  and  purposes  of  those  for  whose  use  it  was 
intended. 

I  have  selected  the  beginning  of  1860  as  the 
period  best  calculated  to  show  just  how  Vir- 
ginia's banking  system  suited  her  people,  and  I 
shall  point  out  the  important  lessons  that  that 
system  teaches.  But  before  doing  so  I  shall 
state  from  the  records  the  banks  that  she  had, 
their  location  and  their  general  condition.  The 
State  required  the  banks  to  make  quarterly 
reports  to  the  Governor  of  their  condition,  and 
the  Governor  sent  these  reports  to  the  legislature 
with  his  annual  message.  All  the  tables  that 
follow  are  taken  from  the  reports  sent  in  by  the 
Governor  for  the  year  1859,  and  are  bound  up  as 
Document  No.  14  with  the  message,  commencing 
at  page  1293,  to  be  found  in  the  State  Library. 
It  is  labeled  "Bank  Statements,  1859."  They 
make  a  complete  photograph  of  Virginia's  finan- 
cial condition  at  the  beginning  of  1860. 

One  other  circumstance  should  also  be  stated. 
For  some  time  the  policy  of  setting  up  banks  with 
large  capital  and  a  number  of  branches  was 
adhered  to,  but  after  a  while  the  people  com- 
menced establishing  banks  with  small  capital  and 
no  branches,  called  independent  banks.  The 
tables  following  will  show  which  were  banks  with 
branches  and  which  were  independent  banks : 


14 


VIRGINIA  BANKS  AND  BANKING 


General  State  of  the  Bank  of  Virginia 

AS 


Outstanding 
Debt. 

Virginia 
State  Bonds. 

Real  Estate. 

Stocks. 

4 

'o 

01 

o. 
l/> 

Richmond  .  .  .  . 
Norfolk  

fl,  446,401  70 
355,081  34 
472,361  07 

455,749  05 
577,759  M 
225,135  J9 
252,193  87 
239,615  81 

376,068    12 

239,425  16 

45,000  oo 

38,500  oo 
35,630  oo 
27,424  93 
10,360  71 
8,383  56 
15,299  67 

10,000  00 

8,380  33 
25,152  54 

85,600  oo 
3,080  oo 
2,191  30 

62,641  67 

26,553  57 
30,638  17 
15,685  oo 
67,396  93 
27,715  99 
151,690  65 
28,941  40 

9,6i7  73 
53,261  86 

Petersburg  .  .  . 
Fredericksburg 
Lynchburg  ... 
I^anville 

Charleston  
Buchanan  

25,000  oo 

IO.OOO   OO 

10,000  oo 

Portsmouth  .  .  . 
Union  

12,000  oo 

14,639,790  45 

92,000  oo 

179,131  74 

100,871  30 

474,142  97 

LIAB 


"3  j< 
.t:  o 
5.5 

5* 

•o 
• 
«  „; 

<c  o 

OJ 

£ 

~  « 

5  « 

3  u 
O  4)     . 
O  *-   o 

||ji 

Richmond  
Norfolk  

$861,250  oo 
200,000  oo 

11,666  05 
800  oo 

25,266  80 

8,039  Z5 

300,000  oo 

TO  14^    ^1 

Fredt-  ricksburg 

290,000  oo 
^00,000  oo 

7,449  70 

9,073  61 
II  066  39 

Danville  

125,000  oo 

19,314  19 

4,798  67 

1  harleston  
Buchanan  

150,000  oo 
125,000  oo 

18,505  57 
13,368  59 

6,234  51 
5,099  09 

Portsmouth 

225,000  oo 

7  64Q    2Q 

Union      

75,000  oo 

50,675  oo 

4,779  12 

$2,651,250  oo 

226,779  10 

92,152  16 

PRIOR  TO  THE  CIVIL  WAR 


15 


and  Branches  on  the  ist  day  of  October,  1859. 
SETS. 


In  Notes  of  the 
Branches. 

~o^t-~ 

§j«| 
IrP 

Jl  pv 

a  oft.- 

°lll 

$«.£$ 

IttJ! 

•5  «  £ 

J3  oO-i  0 

Due  from  the 
Branches. 

Duefromother 
Banks. 

F.xpenses. 

Loss  by 
Robbery. 

Aggregate. 

69,245  oo 

127,111  41 
7,260  42 
3,835  oo 

5,213  87 
17,539  46 
1,197  72 

4,435  oo 
761  92 
520  oo 
18,645  °° 

40,812  88 
4,406  77 
5.4"  42 

30,980  29 
4,9*5  48 
5,48i  83 
6,500  34 

32,369  93 
3.912  33 
14,512  90 
2,465  23 
370  40 
7,345  36 

6,398  59 
325  5i 
6,003  15 
2,069  24 

2,873  55 
1,203  46 
1,947  46 

1,464  37 
2,076  39 
1,059  70 

3,814  oo 
1,730  oo 
180  oo 
665  oo 

2,000  oo 
2,630  oo 
3,760  oo 
615  oo 
12,715  oo 

1,018  63 
958  24 
27,164  90 
5>o6i  43 
753  15 
6,121  83 

365  oo 

60  oo 
165  oo 

2,712  37 
6,  180  oo 

18,900 

91,190  oo 

186,519  80 

15,646  37 

91,709  29 

108,854  09 

25,421  42 

18,900 

6,024,177  43 

ILITIES. 


«  . 

"3  c 
o.o 

o~ 

33 

O  o 

*•  c 

4)  rt 

3* 

in 

s|i 

v~5  «« 

3  0« 

Q 

4i5? 

V)  G 

uS 

Q 

Aggregate. 

106  OAI  11 

28  417  88 

OQ  84.7  6l 

7TC  2OI  8l 

QI  12O  OO 

10  376  28 

48  616  64 

70  ore  02 

121  1  90  OO 

5/172  2Q 

I  OQ1  QI 

Il8  27S  14 

71  3V  oo 

4C.76  t6 

14  861  8«; 

TO  I  OQ4  4O 

2qi  86?  t;o 

7  82  S  3Q 

14  'JTO  "\7 

126  406  ^s 

108  655  oo 

468?  4Q 

I  82"?  QI 

II  7^6  14 

141  1IZ  OO 

2  468  74 

177  1OO  06 

140  665  oo 

821  92 

Q7/1  82 

20  801  07 

QA  8l1  OO 

c  728  O2 

48,4IO  6? 

CA  6o7  72 

I'jc  CTO  OO 

I  1  77  QA 

J.82Q  87 

71:  272  Q3 

1,268,728  83 

69,042  87 

235,302  61 

1,480,921  86 

6,024,177  43 

16 


VIRGINIA  BANKS  AND  BANKING 


State  of  the  Farmers  Bank  of  Virginia,    Includ 

AS 


Debt 
Outstanding. 

Sterling  Bills. 

Stocks. 

Specie. 

Richmond  

4l  62^,007  80 

1  717  88 

IQ.QOO    13 

1  2  S,  144  08 

Norfolk  

417,710  71 

24.824  oo 

Petersburg  

44O.23Q  06 

3.333   34 

18,036   'JO 

Fredericksburg.. 

44-J,  CC7    6<; 

16,  soo  84 

Lynchburg  

112,344  4S 

4,  Oil    11 

4S.682  Q3 

Winchester  

172  080  71 

34  O3I    OS 

Danville  

276  847    13 

6s  733   76 

Farmville  

•7T2   362    86 

•2C  •jyo  83 

Charlottesville.  . 

277  080    8  \ 

47  241   00 

\Vytheville  

271   3?6   72 

44,064    SS 

Alexandria  

561  490  66 

21.1:26    23 

24,680   25 

Lewisburg  

230,152  oo 

47.220   77 

Blacksburg  

227,129  06 

2Q.  SSS   86 

$5,948,375  55 

13,  962   33 

41,426   76 

558,996   50 

LIAB 


Capital  Stock. 

Notes  in 
Circulation. 

Individual  Deposits. 

Richmond  

$854,  500  oo 
290,000  oo 
270,000  oo 
260,000  oo 
325,000  oo 
200,000  oo 
155,000  oo 
168,100  oo 
116,400  oo 
136,900  oo 
300,000  oo 
15,000  oo 
60,000  oo 

167,773  oo 
51,433  oo 
84,840  oo 
58,782  oo 
170,431  oo 
154,856  oo 
148,827  oo 
156,351  oo 
100,162  oo 
160,932  oo 
104,888  oo 
123,936  oo 
146,274  oo 

798,805  04 

107,171    20 

102,761  10 

I27,OO6    22 
47,368   48 
43,508   96 

39,563  61 
79,772  70 
69,447  06 
37,953  79 
234,187  48 
41,571  20 
7,042  64 

Norfolk  

Petersburg  
Fredericksburg.. 
Lynchburg  
Winchester  
Danville  

Farmville  

Charlottesville.  . 
Wytheville  

Alexandria  
Lewisburg  

Blacksburg  

$3,150,900  oo 

1,629,485  oo 

1,736,159  48 

PRIOR  TO  THE  CIVIL  WAR 


17 


ing  the  Branches,  on  the  ist  day  of  October, 
SETS. 


Notes  of  other 
Banks  in 
Virginia. 

Notes  of  other 
Banks  out  of 
Virginia. 

Due  by  other 
Banks. 

Real  Estate. 

Loan  to  Com- 
monwealth in 
Treasury 
Notes. 

Aggregate  of 
Assets. 

I^6,IOI   02 

?,O3O  Q5 

28,306  86 

55,685  43 

44.,  3OO  OO 

7,833  OO 

2,825  °° 

5,007    2O 

17,762  22 

5,286  OI 

A,  52Q    32 

27,274  21 

3,621  OO 

777   no 

3  061  86 

9  ooo  oo 

7,203  oo 

IO,5l8    OO 

I2,2O2    35 

2,230  oo 

381  oo 

3.2OQ    63 

12,335   OO 

8,900  oo 

130  oo 

5,015  86 

5,765   63 

360  oo 

1  6  444  28 

TO  OO6    11 

12,431    OQ 

6,050  oo 

5,863  oo 

8,5O3    12 

3,100  oo 

0,231  05 

12,300  oo 

7,275   OO 

31  246   17 

II   24Q    5O 

1,150  oo 

1,030  oo 

5,366  82 

1,378  oo 

A  -216  c;4 

7.  524    56 

196,968  02 

15,132  95 

I33,9!8  39 

189,617  35 

44,300  oo 

7,142,697  85 

ILITIES. 


Due  to  other 
Banks. 

New  Surplus 
and  Contingent 
Fund. 

Profits. 

In  transitu 
Between 
Bank  and 
Branches. 

Aggregate  of 
Liabilities. 

43,694  80 

158,233   8q 

23,255   60 

IQ.  247   20 

16,700  QQ 

1,  171    14 

6,  3  5  5  08 

21,357  75 

6.OI5   7Q 

I4,8qq  76 

4,152  77 

5,236  O5 

24,580  25 

3,2Q5  08 

6,286   50 

17,521   57 

6,  IO4    3O 

3,801    34 

4,O48  44 

4,548  70 

6,301    22 

IS,726     8O 

2  QOO    "?O 

'2,I'2'2     CC 

A    •3Q7    AA 

2O.I4-4.    2S 

14,256  56 

8  OOQ    Z.A 

2,  si6  60 

100,000  oo 

A  OZO   48 

1.409  36 

50,000  oo 

1,075   62 

190,053  99 

331,109  44 

85,742    65 

19,247   29 

7,142,697  85 

18 


VIRGINIA  BANKS  AND  BANKING 


Statement  of  the  Condition  of  the  Exchange  Bank  of  Vir 

AS 


,  u 

<n 

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^fJS 

t_ 

BANK  AND 

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BRANCHES. 

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Parent  Bank..  

$580,044  10 

41.286  6  1 



9,994  44 

5,302  19 

Richmond  Branch.... 

859,25605 

381,73247 
490  891  28 

10,884  95 



17,095  59 

36>337  37 

832  28 

276  863  96 

17  86?  08 

280  486  42 

80  100 

a  68607 

A1&  08?  26 

c   ftoft  Oft 

^3,644,277  40 

1,486,013  90 

20,714  03 

95,007 

6,731  27'   129,992  05 

82,229  38 

B   98,871  01 

$31,121  04    In  trans 

LIAB 

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$400,900  oo 
748,300  oo 
572,100  oo 
300,000  oo 
265,800  oo 

124,68700 
67,15650 
157.804  oo 
312,508  oo 
48.552  oo 

8,90983 
38,595  42 
36,382  04 
1,035  90 
2,497  »6 

40,139  82 
13,683  84 
22,246  17 
8,584  27 
14,01801 

1,341  oo 
33800 
2,781  5° 
66700 
65150 

Richmond  Branch... 
Petersburg  Branch  .  .  . 
Clark  esville  Branch. 
Alexandria  Branch.  . 

Abingdon    Branch... 

172  827  oo 

1  66  26 

7  808  O«i 

Weston  Branch  
Lynchburg  Branch... 

150,000  oo 
400,000  oo 

312.044  5° 
312,200  oo 

J4278 

4,585  78 

$3,088,600  oo 

1,498,450  50 

98,871  oi 

170,323  83 

5,779  oo 

A       61,081  oo            B 

Net  circulation  30th  Sept.,  1859, 


PRIOR  TO  THE  CIVIL  WAR 

ginia  and  Its  Branches  on  the  3oth  day  of  September, 
SETS. 


19 


tn 

a 

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7  568  88 

33.979  96 

50,396 

97^619  69 

66,625  83 

6,650  44 

8  661  Si 

884  28 

14,11945 

2,550  oo 

56.078  49 

1,401  97 

2,948  65 

TOO 

6  265  oo 

18,24307 

1,237  81 

45027 

....^  

64,388  09 

162,377  15 

",99947 

61,081 

152,190  90 

14,404  47 

435,210  23 

26,6O2  62 

26,637  55 

1,039  43 

6,356,507  85 

A 

E 

C 

D 

itu,  bank  and  branches. 

ILITIES. 


Deposits. 

Contingent  Fund. 

Discount  and 
Interest. 

Exchange. 

General  Profit 
and  Luss. 

Current  Profit 
and  Loss. 

KS 

i-  a 
M 

M-J 

1^3,934  57 

190,369  63 

18,062  27 

57,944  63 

64,463  71 

13,187  12 

636  97 

16869 

,116  02 

4.368  64 

5,606  87 

18,200  34 

23,708  75 

22,191  53 

66,59869 

3,69971 

14,546  20 

2073 

1,150,630  48 

C     26,637  55 

D    1,03943 

$205,211  48 


I9  85 


20 


VIRGINIA  BANKS  AND  BANKING 


STATEMENT  OF    THE    CONDITION    OF    THE    BANK    OF 
BERKELEY  IN  VIRGINIA,  SEPTEMBER  30,  1859. 


ASSETS. 


Wheeling  City  guaranteed  and 

State    bonds 

Premium  paid  on  above  bonds 

Inland  bills  of  exchange 

Bills   receivable 

Current  expenses 

Bank  property 

Due  by  banks 

Notes  of  other  banks 

Gold,  silver  and  copper  coin. 


$45,602  31 
32,212  oo 


$100,000  oo 
5,000  oo 


77,814  31 

127  58 

257  25 

8,605  97 

1,805  oo 

18,578  49 

$212,188  60 


LIABILITIES. 


Capital    stock   paid    in $100,000  oo 


Notes  of  the  bank  in  circulation. 
Discounts  and  exchange  received. 

Dividends    unpaid 

Surplus    

Due  to  other  banks 

Deposits    


55,085  oo 
1,229  72 
297  So 
8,035  70 
3,o88  50 

44,452  18 


$212,188  60 


PRIOR  TO  THE  CIVIL  WAR 


21 


QUARTERLY   STATEMENT  OF  THE  BANK  OF  CHARLES- 
TON, VA.,  TO  OCTOBER  i,  1859. 


ASSETS. 


Bills  of  exchange  

1859- 
$128,632  90 

64,277  77 
5,000  oo 
45,488  53 
14,000  oo 

22,003  59 
20,878  01 
24,000  oo 
70,574  88 
8,043  °o 
20,043  72 
2,972  04 
8  65 

1858. 
$91,096  48 
41,892  16 

Bills    receivable  

Bills  in  judgment  

Bonds  and  stocks  

44,368  53 

Real    estate  

Personal     property    and    ex- 
pense account  

3,429  4i 

Suspense   account  

Stock  held  by  bank  

100,000  oo 
61,936  32 
1,000  oo 
13,175  47 
1,289  26 

Due  from  banks  and  bankers. 
Cash,  in  transitu  

Gold  and  silver  

Currency  and  cash  items  .... 
Currency  and  cash  items  

LIABILIl 

Capital    stock  

$425,923  09 

$358,187  63 

riES. 

1859- 
$300,000  oo 

5,145  00 

93,050  oo 

21,635  83 

6,085  10 
7  16 

1858. 
$300,000  oo 
19,123  oo 

30,145  oo 
6,545  80 

2,369  40 
4  43 

Kanawha    outstanding  

Bank  of  Charleston  outstand- 
ing   . 

Deposits    

Exchange    account    and    dis- 
counts and  interest  

Due  to  banks  and  bankers  

$425,923  09     $358,187  63 


22 


VIRGINIA  BANKS  AND  BANKING 


COMPARATIVE    STATEMENT    OF    THE    CONDITION    OF 

THE  BANK  OF  COMMERCE  AT  FREDERICKSBURG, 

VA.,  ON  THE    IST   OP   OCTOBER,    1858,    AND 

THE  IST  OF  OCTOBER,  1859. 


ASSETS. 

Virginia  State  stocks  and  guar- 
anteed bonds  

1858. 
$146,800  oo 

I859. 

$120,800  oo 

Premiums  on  same  

Q.QOO  24 

9,900  24 

Bills  and  notes  discounted.  . 
Bills  and  notes  protested  
Banking  house,  furniture,  etc. 
Interest    on    Chesapeake    and 
Ohio  Canal  bonds,  unpaid. 
Interest  on  James  River  and 
Kanawha  bonds,   unpaid.  .  . 

129.773  85 

6,201  52 

2,000  OO 

240  oo 

115,432  14 

22,939  97 

2,000  00 

240  oo 

1^2    "?O 

Current    expenses,    including 
salaries    

Q54  62 

804  ^4 

Due  by  banks  and  bankers.. 
Cash: 
Notes  of  banks   incorporated 
by   State  

2,424  46 

1,070  oo 

3,360  67 

415  OO 

Other  banks  

2OO  OO 

Specie  —  gold,  silver  and  cop- 
ner 

17.  ^04   14 

18891  76 

$317,068  83 

$295,156  82 

LIABILITIES. 

Capital  stock  subscribed  and 
paid    in  

1858. 

$196,800  oo 

1859. 

$169,500  oo 

Circulation    

84.  mo  oo 

00,7^0  oo 

Discount  and   interest  

1,111   11 

1,603  37 

Due  to  banks  and  bankers.  . 
Due  to  individual  depositors. 
Exchange  premiums  received. 
Contingent   fund  

4,918  05 

13,593    10 

3,oi6  37 
900  oo 

5,268  30 

20,574  ii 
1,461  04 
6  ooo  oo 

Bills  payable  

I2OOO  OO 

$317,068  83      $295,156  82 


PRIOR  TO  THE  CIVIL  WAR  23 


STATEMENT     SHOWING     THE     CONDITION     OF     THE 
FAIRMONT  BANK,  OCTOBER  i,  1859. 

ASSETS. 

Bonds  guaranteed  by  the  State $60,000  oo 

Banking-house   and   lot. 2,948  04 

Stock  of  this  bank I.75O  oo 

Personal    property 1,079  80 

Interest  due  from  the  State 1,80000 

Bills    receivable 33,269  36 

Domestic   bills 10,253  32 

Due    from   banks 908  23 

General    expense    account 49948 

Specie — gold    7,995  80 

silver    1,070  41 

Notes  of  Virginia  banks 4,348  oo 

Notes  of  other  States 200  oo 


LIABILITIES. 


$126,122  44 


Capital  stock $57,95O  oo 

Circulation    43,o6o  oo 

Surplus 3.882  28 

Dividends    unclaimed 469  50 

Exchange  account 307  75 

Discounts  and  interest 679  31 

Due  to  banks 7,887  07 

Due  to  depositors 11,886  53 

$126,122  44 


24 


VIRGINIA  BANKS  AND  BANKING 


STATEMENT   OF   THE    CONDITION    OF  THE    BANK    OF 

HOWARDSVILLE,  VA.,  ON  1ST  DAY  OF  OCTOBER, 

1859,    COMPARED  WITH   IST  DAY   OF 

OCTOBER,  1858. 

ASSETS. 

1859.  1858. 

State  of  Virginia  and  guar- 
anteed bonds  deposited  with 
the  Commonwealth $180,30835  $202,60835 

Property  of  the  bank  and  per- 
manent expenses 1,51500  1,71696 

Bills  receivable — loans  to  Di- 
rectors    24,627  48  14,259  47 

Bills  receivable  —  loans  to 
others  (all  inland) 101,292  21  143,218  79 

Bills    protested 1,88465     

Interest  due  on  guaranteed 
bonds  537  oo  

Due  from  banks  and  bankers.  4,666  82  3,8n  40 

Exchange    414 

Incidental    expenses 43  16 

Salaries    .  625  oo  625  oo 

Cash  on  hand,  viz: 

In  specie 30,096  42  34,284  82 

In  notes  of  this  bank 31,221  oo  8,216  oo 

In  notes  of  other  banks  and 
checks  7,275  08  12,049  61 

$384,049  01       $420,837  70 

LIABILITIES.  1859.  1858. 

Capital    stock $165,000  oo  $181,000  oo 

Notes  of  this  bank  in  cir- 
culation    133,779  oo  172,784  oo 

Notes  of  this  bank  on  hand.  31,221  oo  8,216  oo 

Deposits  (including  certifi- 
cates)    24,39402  31,96793 

Contingent    fund 10,92096  13,22670 

Discount  and  interest 3,975  66  5,433  67 

Exchange  account 177  96     

Due  to  banks  and  bankers...  14,580  41  8,209  40 


$384,049  01       $420,837  70 


PRIOR  TO  THE  CIVIL  WAR  25 


QUARTERLY  STATEMENT  OF  THE   BANK  OF   THE  OLD 

DOMINION   AND    BRANCH    AT    PEARISBURG, 

SEPTEMBER  30,  1859. 

ASSETS. 

Bills  and  notes  discounted $396,783  70 

Virginia  State  stock  and  guaranteed  bonds.  340,000  oo 

Banking-house    11,50147 

Property  account 265  81 

Current    expenses 2,871  10 

Interest  due  by  the  State  of  Virginia 1,030  46 

Due  by  banks  and  bankers 16,194  03 

Notes  of  and  checks  on  banks  in  the  State. .  17,446  16 

Notes  of  banks  out  of  the  State 130  oo 

Coin    40,390  42 

Stocks    7,121  86 


$833,735  01 


LIABILITIES. 


Capital    stock $403,900  oo 

Due  to  banks  and  bankers 59,249  39 

Individual    deposits 122,069  79 

Discount  and  interest  account 3,995  76 

Contingent    fund 20,20000 

Circulation    221,700  Oo 

Unpaid    dividends 2,168  oo 

Exchange  account 144  21 

Surplus    fund 18786 

$833,735  01 


26 


VIRGINIA  BANKS  AND  BANKING 


STATEMENT   OF    THE    CONDITION    OF  THE    BANK    OF 

PHILIPPI,   ON   THE   EVENING  OF    THE   SOTH 

OF  SEPTEMBER,   1859. 

ASSETS. 

Bills  of  exchange  bought...  $1,50000 

Bills  and  notes  receivable. . .  66,604  °° 

Gold  and  silver  coin  on  hand.  $5,93*  20 

Sight  exchange  on  Baltimore.  5,642  40 

Funds  at  agency  in  Richmond.  *6,O54  26 

17,627  86 

Notes  on  hand  of  this  bank.  3,915  oo 
Notes  on  hand  of  other  sol- 
vent  banks IJ3O  oo 

Cash    items 184  47 

Due  from  banks  and  bankers.  162  52 

Exchange  account 11680 

Interest  due  from  James 
River  and  Kanawha  Com- 
pany    219  oo 

State    stocks    deposited    with 

treasurer    74,400  oo 

Permanent  expense  account..  1,140  oo 

Salary   account 31250 

$167,312  15 
•Exchange  deposited  for  redemption  of  notes. 

LIABILITIES. 

Bills  of  circulation $74,400  oo         $74,400  oo 

Less  notes  on  hand 3,9*5  oo 

Actual    circulation $70,485  oo 

Capital    stock 74,400  oo 

Contingent    fund 4,1 10  oo 

Deposits,  including  certifi- 
cates    10,350  16 

Due  to  banks  and  bankers...  1,998  14 

Discount  and  interest  account  2,053  85 

$167,312  15 


PRIOR  TO  THE  CIVIL  WAR 


27 


A  COMPARATIVE  STATEMENT  OF  THE  CONDITION  OF  THE  BANK  OF 

ROCKBRIDGE,     OCTOBER     I,     1858,    AND  OCTOBER    I,    1859. 

ASSETS.  1858.  1859. 

State  bonds  deposited  with  treasurer $125,000  oo  $150,000  oo 

Coin  in  bank 21,825  28  17,502  42 

Coin  in  Bank  of  Commonwealth,  for  pur- 
pose of  redemption 6,042  36 

Office  notes   in   bank 24,52500  33,33000 

Office  notes  in  Bank  of  Commonwealth 6,000  oo 

Notes  of  other  banks 1,208  oo  288  oo 

Checks 36  oo 

Bills  and  notes  discounted 83,227  83  117,995  25 

Expense  account 13895  10616 

Salary  account 550  oo  575  oo 

Property  account 2,122  89  2,140  39 

James  River  and  Kanawha  Company 343  50 

Due  from  banks  in  the  State 8,033  49  925  23 

Due  from  banks  out  of  the  State 236  12 

$266,631  44       $335.520  43 

LIABILITIES.  1858.  1859. 

Capital  stock $101,10000       $125,00000 

Notes  issued  of  the  following  denomi- 
nations :  I8sg  I8SQ 

Fives    $15,950  oo  $27,320  oo     

Tens 42,900  oo  56.530  oo     

Twenties    . . .  40,000  oo  40,000  oo     

Fifties   26,15000  26,15000     

$125,000  oo       $150,000  oo         125.000  oo         150,000  oo 
Less  notes  on 
hand    24,52500  39,33O  oo     

Actual  cir- 
culation.      $100,475  oo       $110,67000     

Deposits 28,670  96  42,335  04 

Discount  and  interest 2,113  74  3,031  88 

Dividends  unpaid 5  oo     

Exchange   06  01  76  7o 

Contingent  fund 4,815  oo  6,250  oo 

Profit  and  loss 1,057  9O  612  01 

Due  to  banks  in  the  State 3,104  21  7,387  04 

Due  to  banks  out  of  the  State 068  62  827  76 


$266,631  44       $335,520  43 


28 


VIRGINIA  BANKS  AND  BANKING 


CONDITION  OF   THE   BANK   OF   ROCKINGHAM    ON   THE 
IST  DAY  OF  OCTOBER. 

ASSETS. 

Virginia   stocks    and   guaran- 
teed  bonds $260,38000 

Premium    account 11,47680 

Current  expenses 132  23 

Permanent  expenses 2,39271 

Real  estate 3,266  67 

Outstanding  debt 147,788  34 

Amount  due  from  other  banks 

and  bankers 67,350  06 

Notes  of  other  Virginia  banks  5,999  °o 

Foreign  bank  notes 466  oo 

Wheeling    City    coupons    un- 

^paid,  due  January  I,  1859.  •  1,800  oo 
James    River    and    Kanawha 

Company  interest  unpaid...  243  oo 

Checks,  etc 243  26 

Coin   in  vault $40,45283 

In  transitu 2,500  oo 

42,952  83 


$544,400  QO 


LIABILITIES. 

Capital  stock $211,200  oo 

Notes  in  circulation — 55,  los,  2os  and  505 181,605  oo 

Bills   payable 15,000  oo 

Contingent  fund 16,000  oo 

Dividends  unpaid 524  oo 

Discount  and  interest 3,136  63 

Exchange  409  08 

Deposits    105,026  72 

Amount  due  to  other  banks  and  bankers 11,589  47 

$544,490  90 


PRIOR  TO  THE   CIVIL   WAR 


29 


STATEMENT    OF    THE   CONDITION    OF    THE    BANK     OF 

SCOTTSVILLE  ON  THE  1ST  DAY  OF  OCTOBER, 

1859,  COMPARED  WITH  THE  IST  DAY 

OF  OCTOBER,  1858. 

ASSETS.  1859.  1858. 

Virginia  State  and  guaranteed 

bonds   $90,12800       $100,12800 

Permanent  expenses 1,854  59  1,854  59 

Incidental  expenses 58  85  32  29 

Discount  on  State  bonds  sold.  587  50     

Interest  due  ist  July,  1859,  by 

the  James  River    and  Kana- 

wha     Company,     on     their 

bonds    guaranteed    by    the 

State 453  oo     

Bills  and  notes   discounted. .  70,689  88  68,507  54 

Due  from  other  banks 1,437  93  3,i68  08 

Cash  on  hand : 

Notes  of  this  bank.  $10,442  oo     10,05500 

Notes       of      other 

banks  in  the  State 

and   checks 1,69411     1,796  58 

Notes  of  banks  out 

of  the  State 12500     12700 

Specie   16,61045     

28,871  56  18,855  67 

Exchange 87 

$194,081  31        $204,525^62 

LIABILITIES.  1859.  1858. 

Capital  stock $77,ooo  oo  $77,ooo  oo 

Profit  and  loss 350  73  667  41 

Contingent  fund 3,85000  3,85000 

Discount   and   interest 73269  66348 

Exchange  46  04     

Dividends  unpaid 12000  13500 

Due  to  other  banks 10,701  92  6,674  40 

Deposits    11,17093  15,42633 

Whole    amount    of 

notes   issued $90,109  oo  90,109  oo  100,109  oo 

Deduct     notes     on 

hand 10,442  oo  

Actual    circula- 
tion   $79,667  oo  

$194.081  31       $204,525  62 


30 


VIRGINIA  BANKS  AND  BANKING 


CONDITION    OF    THE    CENTRAL    BANK    OF    VIRGINIA, 

OCTOBER  i,  1858,  AND  OCTOBER  i,  1859. 

ASSETS.  1859.  1858. 

Virginia  securities $143,90500  $181.90500 

Premium  account 9,005  90  9,024  83 

Outfit  3,684  51  3,684  51 

Real   estate 11,85046  11,63374 

Outstanding  debts 163,38231  159,30674 

Exchange    346  90  14  41 

Profit  and  loss 1,785  57  1,677  14 

Due  from  banks 9,402  13  25,304  64 

Coin  in  vault  and  at  agency.  35,809  03  27,111  48 

Bank  notes  and  checks 21,982  93  17,007  07 

Coupons  64000 


$401,244  74       $438.209  56 


LIABILITIES. 

Capital  stock 

Notes  in  circulation 

Deposits,     including     certifi- 
cates   

Contingent  fund 

Bills  payable 

Discount  and  interest 

Unpaid  dividends 

Due  to  banks. . 


1859- 

$201,400  oo 
128,815  oo 

50.363  61 

12,000  00 

700  oo 
2,068  14 
1,139  oo 
4,758  99 


1858. 

$237,200  oo 
127,620  oo 

55.311  41 

12,000  oo 
700  oo 

1,423  10 
965  50 

2,989  55 


$401,244  74   $438.200  56 


PRIOR  TO  THE  CIVIL  WAR 


31 


QUARTERLY  STATEMENT  OF   THE   CONDITION  OF  THE 
DANVILLE  BANK,  OCTOBER  i,  1859. 

ASSETS. 

Notes  discounted $204,921  88 

Inland  bills  discounted 35,375  86 

Foreign  bills  discounted 299,251  25 

$539,548  99 

Due  from  other  banks 15,687  70 

Specie   93,69692 

Notes  of  banks  in  this  State 

other  than  ours 4,835  oo 

Notes  of  foreign  banks 230  oo 

$653,998  61 
The  whole  of  the  outstanding  debt  is  considered  good. 

LIABILITIES. 

Capital  stock  subscribed $300,00000 

Capital   stock  unpaid 10,156  93 

Capital  stock  paid $289,843  07 

Due  to  other  banks 30,193  02 

Circulation    280,415  oo 

Deposits    36,943  76 

Surplus   fund 7,43171 

Net  profits  for  the  last  quarter  9,172  05 

$653,998  61 


32 


VIRGINIA  BANKS  AND  BANKING 


STATEMFNT  OF   THE   FARMERS'  BANK  OF  FINCASTLE, 

OCTOBER  i,  1859,  COMPARED  WITH  THE  IST 

DAY  OF  OCTOBER,   1858. 


ASSETS. 

State  securities  deposited  with 

treasurer  of  Virginia 

Stocks  

Exchange  on  New  York 

Specie  

Notes  of  other  banks  in  the 

State 

Notes  of  other  banks  out  of 

the  State 

Bills  and  notes  discounted... 

Suspended  debt 

Salaries  account 

Current  expenses 

Property  account 

Permanent  expenses 

Due  from  banks  and  bankers 

in  the  State 


LIABILITIES. 

Capital   stock 

Circulation — 55  and  los 

Discount  and  interest 

Contingent  fund 

Premium  account 

Exchange  account 

Special   deposits 

Individual  deposits 

Due  to  banks  in  the  State. . . 


1859. 

1858. 

$150,000  oo 
10,000  oo 

$171,000  oo 

1,990  81 

30,950  21 

9,204  80 

33,724  56 

1,128  oo 
160  oo 

3,515  00 

102,480  41 
8,239  21 
395  oo 
ii  56 
724  66 
325  44 

114,853  05 

5,799  77 
326  40 
5698 
720  66 
280  68 

5,125  73 

9,515  80 

$3",53i  03 

$348,997  70 

1859- 

1858. 

$150,000  oo 

121,110  OO 

1,935  64 
8,075  29 
1,221  75 

57  Si 

$150,000  oo 
162,815  oo 
2,060  31 

7,580  96 
1,874  25 

68  76 

3,950  00 

3,950  oo 

24,172  72 
1,008  12 

19,900  79 
747  63 

$311,531  03     $348,997  70 


PRIOR  TO  THE  CIVIL  WAR 


33 


STATEMENT    OF    THE    MERCHANTS'    BANK    OF    VIR- 
GINIA, SEPTEMBER  30,  1859. 

ASSETS. 

Bills  and  notes  discounted $413,084  27 

Cash — gold  and  silver  coin 46,412  86 

Bonds  of  the  State  deposited  in  the  treasury.  403,402  86 

Premium  on  same 33,552  41 

Bonds  of  the  City  of  Lynchburg 3,ooo  oo 

Suspended  debt  and  costs  of  suits 4,018  85 

Real  estate,  banking-house 5,424  70 

Property  of  the  bank 2,677  63 

Due  from  other  banks 3,953  02 

Exchange  account 398  37 

Expense  account 238  74 

Salaries  and  dividend  account 1,310  5Q 

$917,474  21 

Exchange  bought  during  the  quarter  at  par 
to  one-half  per  cent,  premium $188,124  49 

Exchange  sold  during  the  quarter  at  par  to 
one-half  per  cent,  premium $202,918  89 

LIABILITIES. 

Capital  stock $500,000  oo 

Circulation — for  notes  of  the 
following  denominations : 

5s $6i,545  oo 

6s 570  oo 

7s 693  oo 

8s 664  oo 

93 648  oo 

IDS 137,100  oo 

20S 134,400  00 

5os 15,950  oo 

loos 31.800  oo 

$383,370  oo 
Less   notes   on   hand 145,368  oo 

238,002  oo 

Due  to  banks  in   the   State.  $6,676  52 

Due  to  banks  out  of  the  State  51,308  77 

57,985  29 

Due  to  depositors 85,39674 

Contingent  fund 28,341  80 

Bonus  to  State 1,250  oo 

Tax  on  dividend 1,16667 

Interest  account 5,33*  7* 

$917,474  21 


34 


VIRGINIA  BANKS  AND  BANKING 


STATEMENT    OF    THE    CONDITION    OF    THE    SOUTH- 
WESTERN   BANK  OF   VIRGINIA  ON    THE 
OF  SEPTEMBER,   1859,    COMPARED   WITH 
ITS  CONDITION  ON  THE  SOTH   OF 
SEPTEMBER,  1858. 


ASSETS. 

State    bonds    deposited    with 
treasurer  of  Virginia  

1858. 

$IOQ,QOO  OO 

1859. 

$130,000  oo 

Bills   and  notes   discounted  — 
good  

104,298  20 

05,015  =50 

Notes  of  other  Virginia  banks 
Specie,  viz:  gold  and  silver. 
Due  from  other  banks  

5,446  oo 
41,449  94 
8  521  10 

470  oo 

40,885   22 

ii  681  28 

Bank  furniture  and  fixtures. 
Salaries  and  expenses  

1,670  oo 
568  75 

1,670  oo 
780  93 

Foreign   draft  

1,180  oo 

Due  from  Commonwealth  of 
Virginia    

2,^01   OO 

$275,424  99 

$280,502  93 

LIABILITIES. 

Capital  stock  

1858. 

$IOQ,QOO  OO 

1859- 
$100,000  oo 

05,77=;  oo 

05,240  oo 

Individual  deposits  

^,856  8=; 

CCjfiOS    ^2 

Due  to  other  banks  ........ 

7  2?8  47 

12406  88 

Surplus   fund  

4  025    ">I 

c  eg-*  OI 

Discount,    interest,   premiums 
and  profit  and  loss  

i  689  16 

I  787  72 

$275,424  99 

$280,502  93 

PRIOR  TO  THE  CIVIL  WAR 


35 


STATEMENT    OF    THE     CONDITION    OF    THE    NORTH- 
WESTERN  BANK   OF   VIRGINIA,   INCLUDING   ITS 
BRANCHES    AT   WELLSBURG,    PARKERSBURG 
AND  JEFFERSONVILLE,  ON  THE   IST  DAY 
OF  OCTOBER,  1859,  WITH  A  COMPARA- 
TIVE STATEMENT  OF  THE  SAME 
FOR     THE     CORRESPONDING 
PERIOD  OF  THE  PRECED- 
ING YEAR. 


ASSETS. 


I8S9. 


1858. 


Domestic   debt  

$875,940  78 

$020.  "?86  07 

Bills  of  exchange  

550,248  20 

482,129  10 

Stock  of  this  bank  

27,500  oo 

25,000  oo 

Other    stocks  

28.004  58 

2QoI2    51 

Banking-houses      and      other 
real  estate  

128865  42 

121  765   IO 

Due     by     other     banks     and 
bankers  

101,282  62 

133,368  81 

Notes  of  Virginia  banks  

2Q.-JQ7  OO 

2?  Q47  OO 

Notes  of  other  banks,  checks, 
etc  

41.084  8s? 

42.2  "?8  40 

Coin  

118010     H 

171;  420   l6 

Expense  account  

824O     78 

5  120  26 

In  transitu  

IQ84I     80 

$1,930,315  45 

$1,969,893  33 

LIABILITIES. 

Capital  stock  

1859- 
$868,100  oo 

1858. 
$867,100  oo 

Circulation   

623.419  oo 

667,720  oo 

Deposits    

282,059  21 

284.17^  1$ 

Due     to     other     banks     and 
bankers    

57,714  61 

14,788  06 

Contingent   fund  

81  830  80 

04  842  08 

Discount  account  

jc.c-jx  -?6 

17,780  70 

Collection    and   premium    ac- 
count     

1.6^7  47 

1.^64   V7 

In  transitu  

2.121   08 

$1,930,315  45 

$1,969,893  33 

36 


VIRGINIA  BANKS  AND  BANKING 


COMPARATIVE    STATEMENT    OF    THE    CONDITION    OF 
THE    MONTICELLO    BANK,    OCTOBER    I,    1859. 

ASSETS.                                   1858.  1859. 

Virginia    6    per    cent.    State 

securities $237,374  oo  $190,374  oo 

Premium  on  State  securities.             3,918  74  5>5OO  48 
Interest  due  on  State  securi- 
ties      1,813  50 

Stocks  and  bonds  purchased.           16,555  oo  3,ooo  oo 

Real   estate,   banking-house..           11,32522  11,88761 

Rent  account 81  25 

Salary   account 1,09888  1,07501 

Incidental  expenses 280  15  463  54 

Exchange 271 .61 

Due  from  banks 51,606  73  35,249  16 

Bills  and  notes  discounted..         247,821  36  205,18488 

Protested  notes 250  oo  150  oo 

Cash: 

Gold  39,565  oo  29,524  oo 

Silver  686  52  1,388  15 

Copper  i  14  03 

Notes  of  this  bank 36,712  oo  32,830  oo 

Notes  of  other  banks 1,501  oo  8,456  oo 

Checks  of  other  banks 12,667  84  10,261  59 

$661,363  58  $537.510  81 

Amount  in  the  hands  of  redemption  agency, 

Richmond  $i  1,021  38 

30,912  18 

Total  coin $41,933  56 

LIABILITIES.                               1858.  1859. 

Capital    stock $321,00000  $247,50000 

Virginia  State  securities 19,60000  14,60000 

Contingent   fund 21,00000  20,70808 

Circulation  191,80200  147,78800 

Circulation  on  hand 36,702  oo  32,830  oo 

Discount  and  interest 1,792  10  3,464  82 

Exchange    145  67     

Due  to  banks 36,026  15  21,40666 

Certificates  of  deposit 152  50  11,635  50 

Deposits  33,133  16  37,576  85 


$661,363  58      $537,5io  81 


PRIOR  TO  THE  CIVIL  WAR 


37 


STATEMENT  OF  THE  CONDITION  OF  THE  MERCHANTS 

AND  MECHANICS'  BANK  OF  WHEELING  AND 

BRANCHES,    OCTOBER    i,     1859. 


ASSETS. 

Domestic  bills $664,21068 

Inland  bills  of  exchange 887,860  13 

Loaned   to    Directors 

Stocks  owned  by  the  bank. . . . 

Real  estate 

Bonds  and  mortgages 

Banking-houses    

Protests    

Salaries  and  expenses 

Notes    of    other    banks    and 

checks  $63,754  49 

Virginia  bonds 45,ooo  oo 

Com 284,733  3i 

Due  by  banks 251,839  65 


$1,552,070  81 

15,610  oo 

141,634  25 

159,400  57 

50,025  92 

4i,5&5  46 

692  31 

4,684  58 


645,327  45 
$2,611,611  35 


LIABILITIES. 

Capital  stock $786,200  oo 

1,229,540  oo 

1,656  oo 
24,300  32 

61,214  55 

413,973  09 

94,727  39 


Circulation 

Dividends    

Discounts  and  exchange  and  rents. . . 

Contingent  lurid 

Deposits  and  certificates  of  deposit. 
Due  to  banks 


$2,611,611  35 


38  VIRGINIA  BANKS  AND  BANKING 


CONDITION    OF    THE     BANK     OF     THE  VALLEY     OF 

VIRGINIA,  INCLUDING  ITS  BRANCHES,  OCTOBER 

i,  1858. 

ASSETS. 

Specie    $341,73284 

Notes  of  banks  incorporated  by  the  State...  141,436  57 

Notes  of  banks  incorporated  elsewhere 31,635  oo 

Due  from  other  banks 331,216  47 

Notes  discounted 1,901,044  40 

Inland  bills  discounted 292,963  60 

Virginia  treasury  notes 25,400  oo 

Bond   account 29,51206 

Stock  purchased  to  secure  a  debt 8,000  oo 

Real  estate 74,oi8  74 


$3,176,959  68 


LIABILITIES. 


Capital  stock $1,215,000  oo 

Notes  in  circulation 1,196,619  50 

Due  to  other  banks 181,746  94 

Surplus  fund 134,083  18 

Discount    40,499  03 

Deposits    409,01 1  03 

$3,176,959  68 


PRIOR  TO  THE  CIVIL  WAR  39 

These  reports  contain  the  history  of  Virginia's 
banks  and  banking.  They  show  that  she  had 
worked  her  system  down  to  a  bearing,  and  that 
her  system  furnished  her  people  an  abundance  of 
capital  and  circulation;  that  it  was  a  system  that 
answered  every  demand  of  her  people.  She 
would  be  blest  if  she  had  the  same  system  now. 

It  is  dangerous  to  assert  a  negative  and  I  shall 
not  do  it,  but  I  have  been  unable  to  discover  that 
any  Virginia  bank  ever  failed  prior  to  the  civil 
war;  or  that  any  man  ever  lost  a  dollar  by  a 
Virginia  bank-note  prior  to  that  event.  It  is 
also  to  be  noted  that  in  1860  the  general  idea  of 
Virginia's  sound  banking  system  had  become  so 
prevalent  that  the  Virginia  bank-notes  were  at  a 
very  trifling  discount  in  New  York.  The  dis- 
count was  no  more  than  what  was  necessary  to 
send  the  note  to  Virginia  and  bring  back  the 
coin,  say  one-fourth  of  one  per  cent.  All  of 
Virginia's  banks  got  their  assets  into  the  form  of 
Confederate  securities  during  the  civil  war,  and 
all  of  them  went  out  of  existence  at  its  close,  as 
the  result  of  that  fact. 


CHAPTER  II 

The  census  of  1860  shows  that  Virginia,  then 
consisting  of  the  present  States  of  Virginia  and 
West  Virginia,  had  a  population  of  1,047,411 
whites  and  490,865  negroes;  but  the  negroes 
were  all,  except  a  small  fraction,  slaves,  incapable 
of  making  contracts,  and  they  were  not,  there- 
fore, to  be  considered  in  the  case.  The  foregoing 
tables  show  that  the  white  population  of  1,047,41 1 
had  $15,884,543  of  banking  capital,  and  that  they 
had  $9,612,560  of  circulating  notes  for  currency. 
The  banks  were  scattered  throughout  the  entire 
community,  which  was  mainly  agricultural,  so 
that  there  was  an  abundance  of  currency  and  of 
loanable  capital  for  the  use  of  the  people.  There 
were  no  very  wealthy  men,  but  the  entire  popula- 
tion was  well  off.  This  is  the  result  of  a  system 
that  makes  banking  perfectly  free  amongst  the 
people.  The  National-banking  system  is  central- 
izing in  its  tendencies,  and  produces  very  wealthy 
men  at  the  commercial  centers,  while  the  great 
body  of  the  people  are  to  a  large  extent  denied 
banking  facilities. 

These  tables,  when  carefully  studied,  present 
some  most  interesting  suggestions.  Before  deal- 


PRIOR  TO  THE  CIVIL  WAR  41 

ing  with  these,  however,  it  is  well  that  we  should 
inquire  what  were  the  provisions  of  law  govern- 
ing the  banking  business  while  the  state  of  affairs 
existed  that  made  those  tables  possible.  Prior 
to  1837  the  restrictions  upon  the  banks  amounted 
practically  to  nothing.  In  1837  the  legislature 
enacted  a  comprehensive  statute  for  regulating 
the  banks,  the  provisions  of  which  may  be  seen 
in  the  Code  of  1860,  chapter  58,  page  338,  along 
with  some  provisions  adopted  between  1837  and 
1860.  But  all  of  these  together  amounted  to 
very  little  in  the  way  of  regulations.  The  banks, 
after  all  the  regulations,  were  really  left  prac- 
tically free  to  do  about  what  they  pleased,  and 
when  this  fact  is  considered  along  with  the  con- 
dition of  the  banks  in  1860,  it  is  perhaps  the  most 
notable  lesson  to  be  drawn  from  the  case,  except 
one,  to  be  hereafter  commented  on. 

The  banks  were  forbidden  to  do  quite  a  number 
of  trifling  things,  but  practically  no  penalties  were 
imposed  for  infractions  of  these  rules.  For 
instance,  they  were  forbidden  by  section  24  to 
issue  notes  in  excess  of  five  times  the  amount  of 
coin  owned  by  them ;  but  no  penalty  was  provided 
for  violation  of  this  prohibition  and  an  examina- 
tion of  the  foregoing  tables  will  show  that  the 
banks  paid  no  sort  of  attention  to  it. 

By  an  act  passed  in  1857-8,  Sec.  28,  etc.,  they 
were  required  to  pay  all  demands  upon  them  in 


42  VIRGINIA  BANKS  AND  BANKING 

coin,  and  heavy  penalties  were  imposed  for  failure 
to  do  this.  But  this  act  was  passed  after  the 
necessity  for  it  had  gone.  The  banks  had  lived 
through  the  period  when  they  would  have  had 
difficulty  in  paying  coin.  Notwithstanding  the 
regulations  provided  by  law,  therefore,  I  repeat 
that  banking  was  practically  free  in  Virginia  prior 
to  the  civil  war,  and  that  the  results  shown  by  the 
above  tables  were  achieved  under  a  system  that 
left  the  management  of  the  banks  to  those  whose 
money  was  at  stake  and  who,  the  world  over,  will 
always  be  found  the  most  capable  of  taking  care 
of  that  money. 

I  come  now  to  deal  with  the  lessons  which  the 
preceding  tables  teach,  and  the  first  remark  I 
shall  make  is  that  these  tables  prove  that  success- 
ful banking  does  not  necessarily  depend  upon 
legislation.  Here  is  the  most  successful  banking 
system  that  I  know  anything  about,  and  it  grew 
up,  practically,  without  a  single  legislative  aid. 
I  do  not  mean  to  say  that  legislative  prohibitions 
and  penalties  are  useless,  but  I  do  mean  to  say 
that  the  great  assurance  of  successful  banking  is 
the  character  of  the  bankers.  I  very  greatly 
question  if  the  interference  of  the  lawmaker  with 
the  transactions  of  banking  business  does  not 
produce  more  harm  than  good. 

It  was  a  wise  remark  of  Mr.  Buckle,  in  his 
work  on  civilization,  that  the  most  important 


PRIOR  TO  THE  CIVIL  WAR  43 

work  of  the  legislator  has  been  in  undoing  what 
some  previous  legislator  had  done. 

In  direct  support  of  the  proposition  that  suc- 
cessful banking  does  not  depend  upon  legislation, 
I  would  call  attention  to  the  note  issues  of  the 
different  banks,  as  shown  by  the  preceding  tables. 
The  law  allowed  each  bank  to  issue  five  dollars 
of  notes  for  each  dollar  of  specie  that  it  had ;  but 
see  how  the  banks  entirely  ignored  this  authority 
and,  in  their  issues,  were  governed  by  the  con- 
siderations that  control  prudent  business  men. 
When  it  was  safe  to  do  so  they  did  not  hesitate 
to  issue  more  than  five  to  one;  but  when  their 
experience  taught  them  it  was  unsafe,  they  issued 
no  more  than  they  thought  prudent.  The  branch 
of  the  Exchange  Bank  at  Richmond,  for  instance, 
had  out  only  about  one  dollar  of  notes  for  each 
dollar  of  coin  that  it  owned ;  while  the  branch  of 
the  Farmers  Bank  at  Blacksburg  had  out  about 
five  dollars  of  notes  for  each  dollar  of  coin  that  it 
owned.  The  experience  of  the  directors  of  the 
Exchange  Bank  had  taught  them  that  in 
a  commercial  city  like  Richmond  demand 
was  likely  to  be  made  on  the  bank  at  any  moment 
for  the  redemption  of  every  dollar  of  its  notes; 
but  the  experience  of  the  directors  of  the  Farm- 
ers Bank  at  Blacksburg  had  taught  them 
that  they  were  perfectly  safe  in  putting  out  five 
dollars  in  notes  for  one  of  specie,  because  Blacks- 


44  VIRGINIA  BANKS  AND  BANKING 

burg  was  a  trifling  village  of  two  or  three 
hundred  inhabitants,  and  the  notes  of  the  bank 
circulated  principally  in  the  country  around,  and 
country  people  are  not  apt  to  demand  the  redemp- 
tion of  bank-notes. 

Reference  to  the  Blacksburg  Bank  suggests 
another  important  thought  that  its  figures  show. 

In  the  3d  chapter  of  this  essay  I  shall  point  out 
that  currency  notes  are,  to  a  large  extent,  a  thing 
of  the  past  in  localities  where  the  agencies  of 
commerce  make  checks  available  for  business. 
But  they  remain  and  must  remain  agencies  of 
vital  importance  in  the  agricultural  districts, 
because  checks  are  not  adapted  to  the  necessities 
of  the  people  there. 

The  resources  of  this  Blacksburg  Bank  were: 
Capital,  $60,000;  surplus,  $50,000;  profits, 
$1,975.62,  or  $i  1 1,975.62.  But  $7,524.56  of  this 
was  invested  in  real  estate,  so  that  it  really  had 
only  $104,451.06.  It  created  and  issued  $146,274 
of  its  notes,  which,  added  to  its  resources,  gave 
it  $250,725.06  for  business  purposes.  It  loaned 
out  $227,129.06,  which  was  within  $23,596  of  its 
entire  resources  for  loaning,  but  it  had  $29,555.86 
of  coin  in  its  vaults,  so  that  it  had  loaned  out 
$5,959.86  of  its  depositors'  money.  That  was 
the  condition  of  this  bank.  Its  entire  resources 
were  gone  except  its  coin  and  banking-house,  and 
it  had  only  one  dollar  of  coin  to  meet  every  five 


PRIOR  TO  THE  CIVIL  WAR  45 

dollars  of  notes,  which  were  liable  to  come  down 
upon  it  at  any  time.  This  would  be  considered 
"wild-cat"  banking  in  these  days;  but  the  men 
who  did  this  were  wise  men,  who  knew  exactly 
what  they  were  about,  and  they  were  doing1  a 
most  prosperous  and  a  perfectly  safe  business. 

Observe  the  deposit  account  of  this  bank.  It 
was  only  $7,042.64.  There  is  a  deep  meaning  in 
this.  As  I  have  stated,  Blacksburg  was  a  trifling 
little  village,  but  it  is  situated  in  Montgomery 
County — a  blue  grass  region,  and  one  of  the  most 
fertile  in  the  United  States.  The  business  of  the 
bank  was  all  done  with  farmers  and  stock-grazers. 
The  bank  was  managed  by  the  leading  citizens  of 
the  community,  in  whom  every  one  had  confi- 
dence. When  a  farmer  borrowed  money  he  did 
not  take  it  in  the  form  of  a  deposit  on  which  he 
could  check,  but  he  took  it  in  the  form  of  the 
bank's  notes,  which  he  put  into  his  pockets  and 
carried  home.  He  paid  these  out  in  the  neighbor- 
hood where  every  one  had  implicit  confidence  in 
them,  and  they  were  circulated  amongst  the 
people  as  money ;  no  one  ever  thinking  of  demand- 
ing coin  for  them. 

Now  this  is  a  most  significant  illustration  of 
the  importance  of  the  lawmakers  leaving  the 
banker  to  bank  according  to  the  conditions  in 
which  he  finds  himself  situated.  He  is  banking 
with  his  own  money,  and  he  is  going  to  take 


46  VIRGINIA  BANKS  AND  BANKING 

greater  precautions  for  the  safety  of  that  money 
than  any  one  else  will.  At  the  same  time,  if  he 
is  left  unhampered  he  is  going-  to  give  the  com- 
munity far  greater  resources  and  conveniences 
than  it  can  ever  get  if  his  course  is  confined  to  the 
movements  he  can  make  inside  of  a  legislative 
strait- jacket.  The  managers  of  this  bank  knew 
just  what  they  were  about.  They  knew  the  way 
the  people  around  them  looked  at  the  subject,  and 
they  knew  they  were  perfectly  safe  in  doing 
business  upon  this  extended  scale.  If  the  reports 
of  the  banks  in  all  the  other  agricultural  sections 
are  examined  they  will  all  tell  the  same  story,  in 
a  greater  or  less  degree.  Examine,  for  instance, 
the  report  of  the  Bank  of  Buchanan,  a  branch  of 
the  Bank  of  Virginia ;  of  the  Bank  of  Fairmount ; 
of  the  Bank  of  Howardsville ;  of  the  Bank  of 
Scottsville,  and  of  any  of  the  others  situated  in 
an  agricultural  country. 

There  is  another  interesting  fact  connected  with 
Virginia  banks  which  should  be  stated.  When 
the  system  of  independent  banks  came  into  vogue, 
each  bank  that  got  a  charter  had  a  provision 
inserted  in  it  authorizing  the  bank  to  buy 
Virginia  State  bonds  and  deposit  them  with  the 
treasurer  of  the  State,  who  was  to  hold  them  as 
security  for  the  notes  that  bank  might  issue.  A 
specimen  of  this  provision  may  be  seen  in  the 
charter  of  the  Bank  of  Fairmount,  Acts  1850-51, 


PRIOR  TO  THE   CIVIL  WAR  47 

page  50.  This  was  no  doubt  the  inspiration  of 
the  independent  banks.  Accordingly  the  bank 
invested  pretty  nearly  its  whole  capital  in  State 
bonds,  bearing  six  per  cent,  interest,  which  could 
be  bought  at  about  par,  and  were  tax  free. 
This  was  making  six  per  cent,  net  on  its  capital. 
It  then  issued  notes  to  the  amount  of  the  bonds 
bought,  and  in  this  way  doubled  its  capital.  An 
examination  of  the  reports  of  the  independent 
banks  will  show  the  powerful  influence  of  this 
provision  on  their  business. 


CHAPTER  III 

But  the  most  important  lesson  that  Virginia's 
banking  system  suggests  is  the  true  system  of 
banking  for  the  United  States,  and  I  shall  now 
proceed  to  discuss  that  subject.  No  man  will  ever 
have  an  accurate  and  correct  understanding  of 
this  subject  unless  he  has  first  gotten  a  perfectly 
accurate  idea  of  the  true  function  of  the  dollar 
in  business. 

The  free  coiners  of  silver  were  deluded  by  two 
fundamental  and  basic  errors.  One  was  that  the 
Government  possessed  some  sort  of  magic  power 
to  give  a  value  to  metal  and  paper  that  neither 
one  possessed — to  create  fiat  money,  in  other 
words.  The  other  was  what  is  suggested  by  the 
phrase  "quantative  theory  of  money,"  or  the 
idea  that  great  quantities  of  tangible  money — of 
coins  and  notes — are  necessary  to  business.  I 
shall  pass  by  the  subject  of  fiat  money,  but  I  wish 
to  submit  a  few  remarks  upon  the  "quantative 
theory,"  which  is  a  delusion  as  dangerous  as  the 
fiat-money  idea. 

The  free  coiner  thinks  that  business  is  done  by 
exchanging  coin  or  notes  for  commodities,  and 
as  there  are  myriads  of  transactions  in  which 


PRIOR  TO  THE  CIVIL  WAR  49 

commodities  are  bought  and  sold,  so  he  thinks 
there  must  be  tons  upon  tons  of  coin  and  notes  to 
serve  the  purposes  of  these  transactions.  Accord- 
ingly he  thinks  the  population  must  be  badly  off 
if  it  is  lacking  in  this  endless  quantity  of  coin  and 
notes.  He  is  absolutely  wrong  about  this,  and 
his  delusion  is  a  dangerous  one,  freighted  with 
infinite  harm. 

Before  entering  upon  a  thorough  analysis  of 
this  dangerous  delusion,  let  us  first  ascertain  just 
what  is  the  dollar's  true  and  accurate  relation  to 
business  in  its  large  sense.  Although  all  the 
transactions  of  commerce  are  nominally  purchase 
and  sale  of  commodities,  yet  at  bottom  they  are 
nothing  but  exchange  of  commodities.  Although 
we  hear  unending  noise  about  the  sale  of  millions 
of  bushels  of  wheat  and  tons  upon  tons  of  bacon, 
yet  at  bottom  all  that  is  going  on  is  an  exchange 
by  one  locality  of  its  surplus  wheat  for  the 
surplus  bacon  of  another  locality.  I  speak,  of 
course,  of  business  in  its  large  sense,  and  not  of 
retail  transactions. 

Let  me  illustrate.  Jones,  in  the  city  of  Rich- 
mond, Virginia,  buys  10,000  pounds  of  cotton  at 
10  cents  a  pound — $1,000 — from  Thompson, 
of  Wilmington,  North  Carolina.  Jones  sends 
Thompson  his  check  on  the  First  National  Bank 
of  Richmond  for  $1,000.  Smith,  of  Wilmington, 
North  Carolina,  buys  10,000  pounds  of  bacon 


50  VIRGINIA  BANKS  AND  BANKING 

from  Dixon,  of  Richmond,  at  10  cents  a  pound — 
$1,000 — and  sends  him  his  check  on  the  First 
National  Bank  of  Wilmington  in  payment. 
Thompson  deposits  Jones's  check  in  the  First 
National  Bank  of  Wilmington,  and  it  sends  the 
check  on  to  the  First  National  Bank  of  Richmond 
for  collection;  which  is  merely  an  order  for  the 
latter  bank  to  send  $1,000  in  money  to  the 
Wilmington  bank.  On  the  day  that  check  gets 
to  the  Richmond  bank,  Dixon  deposits  Smith's 
check  in  it,  which  was  an  order  for  the  Richmond 
Tbank  to  send  it  to  the  Wilmington  bank  with 
direction  that  the  Wilmington  bank  should  send 
to  Richmond  $1,000  in  money.  But  the  Rich- 
mond bank  on  looking  into  the  case  asks,  why  go 
through  all  this  tom-foolery  of  sending  $1,000  to 
Wilmington  and  bringing  $1,000  from  Wilming- 
ton here?  We  will  settle  the  matter  thus,  it  says 
— we  will  take  the  credit  on  our  books  for  $1,000 
which  Jones  has  and  transfer  it  to  the  credit  of 
Dixon  and  thus  he  will  get  paid  for  his  bacon; 
and  we  will  send  Smith's  check  back  to  the 
Wilmington  bank  and  tell  it  to  transfer  the 
$1,000  credit  on  its  books  that  Smith  has  to  the 
account  of  Thompson,  and  thus  Thompson  will 
be  paid  for  his  cotton.  This  is  done,  the  trans- 
action is  closed  up  to  the  satisfaction  of  every 
one,  and  not  a  dollar  of  money  has  been  used 
in  it 


PRIOR  TO  THE  CIVIL  WAR  51 

The  thing  at  bottom  was  nothing  but  a  swap  of 
commodities  (some  cotton  that  Wilmington  had 
no  use  for,  for  some  bacon  that  Richmond  had 
no  use  for),  effected  through  the  forms  of  pur- 
chase and  sale,  by  transferring  credits  on  the 
books  of  two  banks  from  one  man  to  another 
man.  And  this  is  commerce. 

If  ninety-nine  transactions  out  of  every  hundred 
in  commerce  are  analyzed  and  run  down  to  the 
bottom,  they  will  be  found  to  be  the  Wilmington 
and  Richmond  transaction  in  effect.  They  will 
be  found  to  be  exchanges  of  commodities  effected 
by  the  banks  through  the  forms  of  purchase  and 
sale.  It  may  be  that  some  communities  sell  more 
than  they  buy,  as  the  South  with  its  cotton  crop, 
and  we  would  naturally  expect  that  surplus  to  be 
paid  in  money;  but  in  point  of  fact  it  is  not  so 
paid.  When  all  the  transactions  are  rounded  up 
it  turns  out  that  comparatively  little  of  actual 
cash  comes  into  the  South  beyond  what  is  neces- 
sary to  pay  labor.  A  cotton  transaction  starts  at 
Houston,  Texas,  and  ends  in  an  exchange  of 
credits  at  Chicago,  Illinois. 

The  all-seeing  eye  of  commerce  ranges  over  the 
whole  field  and  makes  the  most  surprising  swaps 
and  exchanges  in  all  directions,  and  when  all  the 
transactions  of  the  season  are  closed  up  it  is 
found  that  those  who  have  got  something  out  of 
the  myriads  of  deals  have  it  in  the  form  of  credit 


52  VIRGINIA  BANKS  AND  BANKING 

in  bank  on  which  they  can  draw  checks,  and  not 
in  the  form  of  coin  or  bank-notes  sent  to  them. 
The  idea  is  well  illustrated  by  the  balance  of  trade 
between  this  country  and  the  rest  of  the  world 
when  it  is  in  favor  of  this  country.  That  balance 
is  sometimes  hundreds  of  millions  of  dollars  in 
our  favor,  yet  but  little  of  this  is  settled  by  an 
actual  transmission  of  gold.  A  New  York 
merchant  owes  $500,000  in  Shanghai  for  tea  that 
he  has  imported,  and  he  buys  $500,000  of 
exchange  on  London  to  pay  it  with.  That  wipes 
out  $500,000  of  the  balance  in  favor  of  this 
country.  Thousands  of  travelers  start  to  Europe 
just  as  that  balance  is  declared,  and  all  buy 
exchange  on  London,  and  spend  millions  on 
millions  in  Europe;  which  wipes  out  that  much 
more  of  the  balance.  Hundreds  of  millions  of 
dollars  of  the  securities  of  this  country  are  held 
in  Europe.  Great  sums  of  exchange  on  London 
are  bought  to  pay  interest  and  dividends  on  these 
securities,  and  so,  when  there  is  a  final  winding 
up,  but  little  if  any  coin  is  sent  here  to  pay  that 
great  balance  of  trade.  It  is  all  paid  by  the 
exchanges  of  credits  by  the  banks  on  their  books. 

We  are  now  in  position  to  go  on  with  the  in- 
quiry. What  is  the  dollar's  real  relation  to  busi- 
ness ?  It  is  a  very  simple  thing  to  make  a  swap  of 
cotton  for  bacon  when  we  get  conditions  similar 
to  those  in  the  Wilmington  and  Richmond  trans- 


PRIOR  TO  THE   CIVIL  WAR  53 

action  narrated  above.  But  suppose  it  had  not 
been  determined  that  cotton  was  worth  ten  cents 
a  pound,  and  that  bacon  was  also  worth  ten  cents 
a  pound,  how  would  we  have  got  any  basis  on 
which  to  exchange  cotton  for  bacon?  We  could 
not  have  come  forward  with  a  proposition  to  give 
10,000  pounds  of  cotton  for  10,000  pounds  of 
bacon,  because  there  would  have  been  no  adjudi- 
cation that  the  one  was  of  a  value  equivalent  to 
that  of  the  other. 

In  order  to  make  these  exchanges  of  commerce 
it  is  necessary  that  there  should  be  a  third  agency 
through  which  we  can  value  each  product  to  be 
swapped,  and  thus  determine  how  much  of  the 
one  is  to  be  given  for  a  certain  quantity  of  the 
other.  Whatever  may  have  been  once  thought, 
mankind  is  now  practically  agreed  that  this 
agency  (or  solvent,  may  I  call  it?)  shall  be  gold. 
The  United  States  takes  25  8-10  grains  of  gold 
nine-tenths  fine  and  coins  it  into  a  disc  which  it 
calls  a  dollar.  It  could  have  called  it  a  sequin, 
an  eagle,  or  anything  else,  but  it  chose  to  call  it 
a  dollar,  and  it  made  that  dollar  the  standard  of 
values. 

All  persons  interested  in  cotton  set  themselves 
to  work  to  ascertain  how  many  pounds  of  cotton, 
under  the  conditions  of  demand  for  and  supply  of 
cotton,  were  worth  25  8-10  grains  of  gold,  under 
the  conditions  of  demand  for  and  supply  of  gold ; 


54  VIRGINIA  BANKS  AND  BANKING 

and  they  determined  that  ten  pounds  of  cotton, 
under  the  then  conditions  of  demand  and  supply, 
were  worth  25  8-10  grains  of  gold,  under  the 
then  conditions  of  demand  for  and  supply  of  gold. 
This  is  the  same  thing  as  saying  that  one  pound 
of  cotton  is  worth  one-tenth  of  258-10  grains  of 
gold ;  or,  in  other  words,  ten  cents,  since  ten  cents 
is  one-tenth  of  a  dollar;  and  that  became  fixed 
as  the  price  of  cotton. 

Those  interested  in  bacon  did  the  same  thing 
in  respect  to  it,  and  ten  cents  a  pound  became 
fixed  as  the  price  of  bacon.  Of  course  to  say 
that  all  persons  interested  in  cotton  and  bacon 
got  together  and  inquired  into  conditions  and 
delivered  judgment  on  them  is  an  exaggeration. 
The  idea  intended  to  be  presented  is  that  the  price 
at  which  the  article  comes  to  be  sold  is  the  aver- 
age and  summary  of  opinions  upon  the  subject 
silently  codified  by  the  law  of  supply  and  demand. 
After  that  it  was  an  easy  thing  for  commerce  to 
take  on  itself  the  exchanging  of  cotton  for  bacon, 
through  its  indirect  agencies.  It  knew  that  the 
law  of  supply  and  demand  had  fixed  the  price  of 
cotton  at  ten  cents  a  pound  and  of  bacon  at  the 
same.  It  knew  that  10,000  pounds  of  cotton 
were  exchangeable  for  10,000  of  bacon,  and  it 
went  on  with  its  business  with  precision  and 
certainty. 


PRIOR  TO  THE  CIVIL  WAR  55 

But  suppose  there  had  been  any  uncertainty 
about  the  valuation  of  either  commodity.  What 
would  commerce  have  done  then?  The  Asso- 
ciated Press  states  that  at  a  dinner  in  London  on 
July  4,  1906,  Mr.  W.  J.  Bryan  said,  "If  the 
United  States  have  prospered  so  greatly  walking 
on  one  leg,  how  much  more  greatly  would  they 
have  prospered  if  walking  on  two?"  He  meant 
by  this  that  we  should  have  had  the  gold  dollar 
as  the  standard  of  value,  and  the  silver  dollar  as 
the  standard  of  value  also,  worth  only  half  as 
much  as  the  gold  dollar.  But  if  the  cotton  in  the 
case  stated  had  been  valued  by  the  gold  standard, 
and  the  bacon  had  been  valued  by  the  silver 
standard,  how  could  they  have  ever  been  ex- 
changed ?  The  cotton,  valued  by  the  gold  stand- 
ard, would  have  called  itself  worth  $1,000,  and 
the  bacon,  valued  by  the  silver  standard,  would 
have  called  itself  worth  $2,000,  and  how  could  the 
banks  have  ever  exchanged  them  by  transferring 
credits  on  their  books?  In  such  cases,  with  a 
double  standard,  it  would  be  necessary  in  every 
case  to  state  in  which  of  the  two  standards  the 
valuation  of  the  article  was  expressed.  It  seems 
apparent  that  Mr.  Bryan's  idea  would  put  the 
banks  out  of  business  entirely  and  that  some  new 
agency  and  scheme  for  conducting  the  operations 
of  commerce  would  become  necessary  under  it. 
But  when  what  Mr.  Bryan  said  in  London  is 


56  VIRGINIA  BANKS  AND  BANKING 

taken  in  connection  with  all  the  rest  that  he  has 
said  upon  the  subject,  is  it  not  apparent  that  he 
is  absolutely  ignorant  of  the  nature  and  function 
of  the  dollar?  Lamentably,  however,  there  are 
millions  of  voters  in  the  United  States  whose 
ideas  upon  the  subject  correspond  with  Mr. 
Bryan's,  and  who  are  just  as  ignorant  of  the 
nature  and  function  of  the  dollar  as  Mr.  Bryan 
is;  and  until  we  can  inform  them  of  the  true 
nature  and  function  of  the  dollar  the  currency 
and  credit  of  the  country  must  continue  subject 

to  recurring  and  disastrous  attacks  upon  them. 

< 
A  hasty  examination  of  the  ideas  that  I  have 

been  presenting  might  suggest  that  as  the  great 
function  of  the  dollar  is  to  put  a  value  upon  each 
commodity,  so  that  a  basis  at  which  they  may  be 
exchanged  may  be  established,  there  might  really 
be  no  need  for  anything  but  an  ideal  dollar,  to  be 
a  standard  of  value,  and  therefore  that  the  world 
is  all  wrong  in  its  demand  for  a  great  quantity  of 
money;  but  this  would  be  a  very  superficial  view 
of  the  case.  The  man  who  has  cotton  to  trade 
for  bacon  does  not  know  where  the  man  is  who 
has  bacon  to  trade  for  cotton.  It  is  the  business 
of  commerce  to  find  these  men  and  bring  them 
together.  The  man  with  the  cotton  says  he  must 
have  something  that  he  can  make  use  of  after  he 
parts  with  his  cotton,  while  commerce  is  hunting 
up  the  man  with  the  bacon.  So  commerce  says 


PRIOR  TO  THE  CIVIL  WAR  57 

to  him,  "I  will  take  your  cotton  and  give  you  the 
money  equivalent  of  it,  and  I  will  hold  the  cotton 
while  I  am  hunting  up  the  man  with  the  bacon." 
It  therefore  gives  him  a  credit  with  a  bank  for 
the  value  of  his  cotton  and  goes  on  with  the  hunt. 
The  same  thing  happens  with  the  man  with  the 
bacon.  Vast  quantities  of  money  are  necessary 
therefore  to  hold  these  transactions  of  commerce 
in  solution  while  these  hunts  for  the  necessary 
parties  to  an  exchange  are  in  progress,  and  if 
coin  and  currency  notes  were  necessary  to  the 
transaction  the  mints  and  the  printing  presses 
would  be  unable  to  furnish  what  was  called  for. 
But,  luckily,  coin  and  notes  are  not  to  any  great 
extent  necessary  to  these  transactions ;  all  that  is 
necessary  is  bank  credit  which  can  be  transferred 
from  account  to  account. 

Commerce  requires,  therefore,  for  its  trans- 
actions vast  quantities  of  that  sort  of  money 
which  bank  credits  furnish,  but  it  has  little  need 
for  coin  or  currency  notes. 

The  free  coiner  is,  therefore,  right  in  claiming 
that  business  requires  great  quantities  of  money. 
But  he  is  totally  wrong  in  thinking  it  is  coin  or 
bank-notes  or  government  notes  that  business 
wants.  Business  turns  from  all  these.  It  is  the 
sort  of  money  that  bank  credits  are  that  business 
wants.  The  one  is  the  life  of  business ;  the  other 
totally  fails  to  meet  the  necessities  of  the  case. 


58  VIRGINIA  BANKS  AND  BANKING 

If,  then,  this  course  of  reasoning  is  sound,  the 
first  and  great  use  of  the  dollar  is  to  measure  the 
value  of  commodities  so  as  to  furnish  a  basis 
upon  which  they  may  be  exchanged;  after  that 
the  dollar  has  little  more  to  do.  The  banks  then 
take  up  the  matter  and  make  the  exchange  by 
transferring  on  their  books  from  person  to  person 
the  credit  values  of  the  commodities. 

It  is  as  a  medium  for  valuing  commodities  that 
the  dollar  is  indispensable,  and  it  must  always 
therefore  be  one  and  a  fixed  thing,  as  immutable 
as  the  yard  stick,  or  commerce  must  get  into 
inextricable  confusion.  As  soon  as  the  fifty-cent 
silver  dollars  got  so  numerous  that  the  Govern- 
ment could  not  always  give  a  gold  dollar  for  a 
silver  dollar,  business  must  have  got  into  the  most 
irremediable  confusion.  But  when  valuation  has 
been  established  commerce  will  get  along  very 
well  without  the  dollar,  by  treating  commodities 
on  its  books  just  as  though  they  were  the  number 
of  dollars  that  the  dollar  measurement  shows 
they  can  be  turned  into. 

The  ideal  dollar  then,  as  a  measurer  of  values, 
and  the  banks  as  the  agents  of  commerce  for 
making  exchanges  through  transferring  the  credit 
values  of  commodities,  are  the  great  hands  of 
commerce,  through  which  the  business  of  the 
world  is  done ;  and  coin  and  bank-notes  are  mere 


PRIOR  TO  THE   CIVIL  WAR  59 

counters  in  these  huge  transactions  which  the 
transactions  do  not  give  even  passing  attention  to. 
But  an  examination  into  the  actual  condition 
of  a  bank  will  give  us  a  much  clearer  idea  of  the 
situation.  I  will  select  for  this  examination  the 
Bank  of  the  Commonwealth  at  Richmond,  a  State 
bank,  and  an  entirely  imaginary  one.  This  bank 
has  a  capital  of  $250,000,  and  $1,000,000  of 
deposits.  It  lends  out  every  dollar  of  its  capital 
and  deposits  except  some  $10,000,  which  it  keeps 
on  hand  in  coin  and  currency  notes  to  meet  the 
demands  of  depositors  who  call  for  actual  cash. 
When  a  customer  comes  to  this  bank  for  a  loan  it 
never  thinks  of  asking  what  cash  it  actually  has 
in  its  vaults,  or  whether  all  its  capital  and  deposits 
are  already  loaned  out.  It  is  going  to  create 
whatever  money  the  customer  needs,  if  his  col- 
lateral justifies  it. 

The  man  may  want  $500,000,  and  the  bank 
may  not  have  $5,000  of  coin  and  notes  in  its 
vaults,  and  all  its  capital  and  deposits  may  be 
loaned  out,  but  it  does  not  hesitate  to  lend  him 
the  $500,000  if  his  collateral  is  satisfactory.  Its 
loan  of  the  $500,000  is  made  to  him  by  the  bank 
taking  possession  of  his  collateral  and  opening  a 
credit  for  his  account  on  its  books  for  $500,000. 
That  is  the  whole  of  the  transaction. 

This  bank  always  keeps  about  $300,000  of  its 
loans  in  the  form  of  call  loans,  on  the  very  best 


60  VIRGINIA  BANKS  AND  BANKING 

of  collateral.  This  is  for  the  purpose  of  provid- 
ing itself  with  an  immediate  fund,  in  case  there  is 
a  run  on  it  for  actual  money.  If  such  a  thing 
occurs  it  immediately  calls  this  $300,000,  and  if 
there  is  any  delay  about  paying  the  call  loans  it 
calls  up  its  correspondent  in  New  York  by  tele- 
phone and  arranges  for  it  to  send  currency  by  the 
next  morning,  and,  if  necessary,  the  bank  uses 
the  collaterals  at  the  back  of  its  call  loans  for  this 
purpose.  It  feels,  therefore,  that  these  call  loans 
of  $300,000  and  its  other  resources  guard  it  per- 
fectly against  any  run  on  it.  Its  other  resources 
consist  in  the  fact  that  it  is  a  perfectly  sound 
bank.  All  that  it  needs  at  any  time  to  deal  with 
any  situation  that  may  confront  it  is  a  little  time. 
It  knows  under  modern  conditions  it  can  always 
get  this.  In  the  first  place  there  are  twenty  other 
banks  in  Richmond,  and  banks  are  clannis'h — 
feeling  that  an  attack  on  one  is  an  attack  on  all. 
It  knows  therefore  that  if  an  emergency  arises 
every  other  bank  in  Richmond  will  aid  it  as  far 
as  it  can,  and  it  has  only  to  be  tided  over  the  first 
day,  because  it  can  telephone  to  New  York  for 
cash,  and  all  the  cash  it  wants  will  be  with  it  next 
morning.  Modern  conditions  of  telephoning, 
telegraphy,  rapid  mails,  and  quick  transportation 
have  solved  all  of  the  banker's  troubles. 

Now  there  are  two  items  in  this  bank's  deposit 
account  that  I  want  to  call  attention  to.     One  is 


PRIOR  TO  THE  CIVIL  WAR  61 

a  loan  to  a  citizen  of  Richmond  of  $10,000, 
which  is  secured  by  a  mortgage  on  the  citizen's 
dwelling-house,  worth  $15,000.  The  other  is  a 
loan  to  a  tobacco  merchant  of  $10,000  upon  100 
hogsheads  of  tobacco  which  the  merchant  has 
shipped  to  Liverpool.  When  the  citizen  got  the 
loan  on  his  house  all  that  was  done  was  that  he 
handed  the  bank  the  mortgage  and  the  bank 
opened  a  credit  on  its  books  to  his  account  of 
$10,000,  on  which  he  proceeded  to  draw  checks. 
Here  was  a  case  of  converting  a  brick  house  and 
lot  into  money  without  getting  one  cent  of 
money,  and  using  what  he  got  as  money  without 
any  one  ever  handling  a  dollar  of  money. 

The  other  case  mentioned  was  this :  the  tobacco 
merchant  who  had  not  credit  for  five  dollars 
shipped  100  hogsheads  of  tobacco  to  his  corre- 
spondent in  Liverpool.  He  brought  the  bill  of 
lading  to  the  bank  and  drew  on  his  correspondent 
with  the  bill  of  lading  attached  to  the  draft  for 
$10,000.  The  bill  of  lading  passed  the  title  to 
the  100  hogsheads  to  the  bank,  so  that  it  had 
them  as  security,  and  it  accordingly  placed 
$10,000  to  the  credit  of  the  merchant,  who  pro- 
ceeded to  dispose  of  it  by  checks.  Here  was  a 
case  of  the  merchant  converting  100  hogsheads 
of  tobacco  into  money;  but  no  money  was  used, 
although  the  merchant  got  every  advantage  that 
could  have  accrued  to  him  had  he  been  handed 


62  VIRGINIA  BANKS  AND  BANKING 

ten  thousand  coined  gold  dollars.  If  the  reader 
will  consult  the  article  in  the  proceedings  of  the 
Virginia  Bar  Association  for  1905,  p.  191, 
entitled  "Lord  Mansfield  and  His  Relation  to 
Our  Laws,"  he  will  see  how  it  became  possible 
for  this  bill  of  lading  that  was  outlawed  to  be 
utilized  as  a  commercial  security.  It  was  the 
most  far-reaching,  beneficent,  and  important  re- 
form in  our  laws  ever  introduced  into  them  by 
Lord  Mansfield,  one  of  the  greatest  benefactors 
of  the  human  race. 

What  is  the  lesson  to  be  drawn  from  these 
facts  ?  It  is  that  a  bank  is  a  veritable  alchemist. 
It  stands  ready  to  turn  all  kinds  of  property  that 
has  value  into  money.  It  prefers  personal 
property  as  the  basis  of  its  operations,  because 
real  estate  transactions  are  slow  of  realization; 
but  it  will  sometimes  turn  brick  and  mortar  into 
cash.  But  the  banks  of  the  country  stand  ready 
to  turn  all  the  crops  of  the  country  into  cash  on 
presentation  of  bills  of  lading  for  them ;  they  turn 
much  real  estate  into  money,  and  they  turn  the 
bonds  and  stocks  and  all  other  available  property 
into  cash;  and  all  of  this  mammoth  business  is 
done  by  them  by  simply  opening  credits  on  their 
books,  with  the  property  pledged  as  collateral  for 
the  credits.  They  need  give  little  thought  what- 
ever to  the  quantity  of  coin  and  notes  they  may 
have  on  hand,  knowing  full  well  that  with  the 


PRIOR  TO  THE  CIVIL  WAR  63 

telegraph,  etc.,  they  can  command  all  the  cash 
needed  whenever  they  want  it.  They  look  only 
to  the  character  of  the  security  offered  for  the 
loan,  and  if  that  is  satisfactory  the  customer  gets 
money  in  the  form  of  a  credit,  which  answers 
every  purpose  that  actual  money  could  fulfil. 

The  banks  then  are  the  true  mints  of  the 
country,  and  they  are  always  making  inconceiv- 
able amounts  of  perfect  money  by  the  credits  they 
create;  and  stand  ready  at  all  times,  if  let  alone, 
to  create  every  dollar  of  money  that  the  country 
needs.  And  they  do  all  this  without  using  more 
than  a  mere  trifle  of  coin  and  notes.  They  do  it 
by  opening  credits  on  their  books  and  holding 
the  property  of  the  country  as  collateral  for  these 
credits.  There  must,  of  course,  be  a  certain 
amount  of  redemption  money,  but  the  amount  of 
this  that  is  necessary  is  so  small  that  there  is  no 
occasion  for  concern  about  it.  The  property  that 
the  banks  hold  as  collateral  for  their  loans  can  be 
always  turned  into  actual  coined  dollars,  if  there 
is  any  necessity  for  coined  dollars,  and  that  is  all 
that  their  business  requires. 

This  explanation  of  the  subject  would  not  be 
complete  for  those  who  do  not  understand  the 
operations  of  the  clearing  house  without  an  illus- 
tration of  such  operations,  of  which  I  will  give 
one ;  and  all  the  others  are  the  same  in  substance 
and  effect. 


64  VIRGINIA  BANKS  AND  BANKING 

Ladenburg,  Thalman  &  Co.  sell  J.  P.  Morgan 
&  Co.  $1,000,000  of  Union  Pacific  bonds  for 
$1,000,000,  and  receive  their  check  on  the  City 
National  Bank  for  $1,000,000,  which  they  deposit 
to  their  credit  in  their  bank,  the  Chemical 
National.  Prince  &  Whitely  on  the  same  day 
sell  H.  B.  Hollins  &  Co.  $1,000,000  New  York 
Central  bonds  for  $1,000,000,  and  receive  their 
check  for  $1,000,000  on  the  Chemical  National 
Bank,  which  they  deposit  in  their  bank,  the  City 
National.  Next  morning  the  representatives  of 
all  the  banks  meet  at  the  Clearing  House  to 
straighten  up  accounts.  The  Chemical  National 
says  to  the  City  Bank,  "I  have  J.  P.  Morgan 
&  Co.'s  check  on  you  to  Ladenburg,  Thalman 
&  Co.'s  order.  Please  pay  it."  The  City  Bank 
answers,  "But  I  have  H.  B.  Hollins  &  Co.'s  check 
on  you  to  the  order  of  Prince  &  Whitely  for 
$1,000,000.  Now,"  continues  the  City  Bank, 
"you  take  that  million  in  your  bank  now  standing 
to  the  credit  of  H.  B.  Hollins  &  Co.  and  place  it 
to  the  credit  of  Ladenburg,  Thalman  &  Co.  and 
they  will  be  paid,  and  I  will  take  the  million  in 
my  bank  now  standing  to  the  credit  of  J.  P. 
Morgan  &  Co.  and  place  it  to  the  credit  of  Prince 
&  Whitely,  and  they  will  be  paid."  So  this 
matter  is  closed  up  and  the  only  thing  that  has 
happened  is  that  one  million  of  dollars  of  Union 
Pacific  bonds  have  been  swapped  for  one  million 


PRIOR  TO  THE  CIVIL  WAR  65 

of  dollars  of  New  York  Central  bonds,  and 
although  there  has  been  a  great  deal  of  nominal 
paying  of  debt,  not  a  dollar  of  money  has  been 
used  and  nothing  has  been  done  but  the  effecting 
of  the  exchange  of  bonds  by  the  transfer  of  their 
credit  value  upon  the  books  of  the  banks.  And 
this  is  the  case  with  all  the  vast  business  trans- 
acted through  the  Clearing  House.  Nothing  is 
done  but  to  exchange  securities  and  commodities 
through  the  transfer  of  credits  on  the  books  of 
the  banks.  It  may  be  that  when  a  day's  clearings 
have  been  completed  the  City  Bank  will  be  found 
indebted  to  another  bank  ten  millions  of  dollars; 
but  if  it  is,  it  does  not  pay  this  balance  with 
money.  It  pays  it  in  a  check  on  some  other  bank, 
and  this  check  is  not  paid  with  money  but  by  a 
settlement  of  balance  of  credits  at  next  morning's 
Clearing  House,  when  possibly  the  check  will  be 
handed  back  to  the  City  Bank  in  payment  of 
balances  due  to  it  by  other  banks.  The  whole  of 
the  transactions  are  exchanges  of  credits,  and 
nothing  else,  and  no  actual  money  of  any  amount 
is  used  in  them. 

We  have  now  arrived  at  a  point  in  this  dis- 
cussion when  actual  conditions  should  be  con- 
sidered, and  such  suggestions  as  may  be  thought 
necessary  for  their  improvement  should  be  made. 

We  hear  constantly  of  more  currency  being 
needed,  and  all  sorts  of  schemes  for  adding  to  the 


66  VIRGINIA  BANKS  AND  BANKING 

currency  are  constantly  being  brought  forward. 
This  claim  for  more  currency  rests  upon  the  fre- 
quent panics  with  which  Wall  street  is  threatened. 
Men  whose  affairs  connect  them  in  any  way 
with  Wall  street — and  all  the  business  of  the 
country  touches  it  in  a  more  or  less  degree — 
watch  the  weekly  bank  statement  as  the  weather 
men  watch  the  barometer.  There  is  undoubtedly 
something  wrong  about  our  currency  system,  and 
how  to  get  it  right  is  the  practical  question  to  be 
considered. 

The  clamor  for  more  currency  misses  the  mark. 
The  commercial  centers  need  no  more  currency. 
They  use  little  or  no  currency.  They  do  their 
business  with  checks,  and  use  currency  only  to 
pay  the  bootblacks,  the  street-car  conductors,  and 
the  petty  vendors  of  retail  articles.  They  have 
all  the  currency  they  need,  and  their  business 
would  be  in  no  way  increased  by  any  addition  to 
the  currency. 

Currency  is  needed,  though,  in  the  country.  A 
cow-boy  on  the  plains  can  make  no  use  of  a  check. 
He  wants  actual  cash.  It  may  be  that  the 
country  districts  require  that  the  volume  of  the 
currency  should  be  increased,  but  I  very  much 
doubt  it.  If,  however,  the  banks  were  perfectly 
untrammelled,  they  would  soon  find  out  whether 
the  country  districts  need  more,  and,  if  they  do, 


PRIOR  TO  THE  CIVIL  WAR  67 

the  banks  would  soon  supply  all  that  was  called 
for. 

What  the  country  needs  is  the  removal  of  all 
restrictions  upon  the  banks  and  freedom  to  them 
to  deal  with  all  cases  as  the  emergency  of  each 
case  requires  that  it  shall  be  dealt  with. 

The  National-Banking  Act  is  full  of  restric- 
tions upon  the  banks  which  produce  no  valuable 
results,  but  embarrass  the  banks  in  all  times  of 
trouble.  If  I  might  specify  what  I  consider  the 
most  injurious  of  these  restrictions,  I  would  name 
the  provision  which  requires  a  National  bank  to 
keep  always  on  hand  a  certain  proportion  of  its 
deposits  as  a  reserve,  and  the  provision  which 
forbids  it  to  lend  more  than  ten  per  cent,  of  its 
capital  to  any  one  person,  or  firm.  The  first  of 
these  provisions  compels  the  banks  of  New  York 
City  to  stand  idly  by  with  plenty  of  funds  on 
hand  and  see  a  panic  grow  up,  which  they  could 
nip  in  the  bud  if  they  were  free  to  deal  with  their 
assets  as  business  men  ought  to  be  free  to  deal 
with  such. 

One  of  the  soundest  State  banks  in  Virginia, 
with  a  capital  of  $500,000  and  $100,000  surplus, 
and  deposits  of  $2,000,000,  lends  out  every  dollar 
of  both  but  about  $15,000  of  coin  and  notes  that 
it  keeps  to  meet  current  demands.  It  has  always 
from  $500,000  to  $600,000  on  call,  on  the  best 
collateral,  and  it  never  troubles  its  head  about 


68  VIRGINIA  BANKS  AND  BANKING 

coin  and  notes;  knowing  well  it  can  meet  what- 
ever emergency  may  arise.  All  the  other  State 
banks,  if  looked  into,  would  probably  be  found 
to  be  doing  business  in  the  same  way. 

The  second  restriction  equally  disqualifies  the 
banks  to  handle  incipient  panics  as  they  could 
handle  them  if  they  were  free.  The  single  firm 
of  J.  P.  Morgan  &  Co.  could  probably  end  an 
incipient  panic  if  the  National  banks  were  free  to 
lend  it  as  much  money  as  that  firm  asked  for; 
and  why  should  they  not  be  free  to  do  it?  If 
that  firm  goes  to  the  City  Bank  of  New  York 
with  $110,000,000  of  government  bonds  and  asks 
for  a  loan  of  $100,000,000,  why  should  the  bank 
not  be  free  to  lend  that  amount  to  it  ?  All  that 
it  does  is  to  take  the  bonds  and  open  a  credit  on 
its  books  for  that  amount.  With  this  credit  that 
firm  could  probably  stop  the  panic,  and  the  bank 
would  be  perfectly  safe  in  making  the  loan,  and 
no  one  else  would  be  denied  a  dollar  because  that 
enormous  loan  was  made  to  that  house.  The 
banks  would  still  create  credits  for  each  succeed- 
ing applicant  that  came  fonvard  with  good 
collateral. 

It  may  be  argued  that  if  the  bank  had  lent  out 
all  of  what  it  is  now  required  to  keep  as  a  reserve 
that  it  would  hesitate  about  lending  Morgan  & 
Co.  $100,000,000,  because  it  would  have  no 
cash  reserve  against  it;  but  that  could  be  met 


PRIOR  TO  THE  CIVIL  WAR  69 

by  making  the  bank  perfectly  free  and  easy  in 
issuing  its  own  notes.  I  do  not  mean  that  it 
should  be  allowed  to  issue  them  without  putting 
up  government  bonds ;  but  a  scheme  could  easily 
be  contrived  by  which  the  City  Bank  could  issue 
$100,000,000  of  notes  any  evening,  with  govern- 
ment bonds  at  their  back  also. 

Panics  all  start  in  Wall  street,  New  York,  and 
if  they  are  crushed  out  as  soon  as  they  appear 
there  the  country  is  never  hurt  by  them.  I  ven- 
ture to  make  the  following  suggestions  for  a 
quick  issue  of  emergency  currency  to  meet  an 
incipient  panic  in  New  York,  by  being  a  reserve 
for  credits  granted.  The  Government  will  keep 
on  deposit  at  the  subtreasury  in  New  York 
$500,000,000  of  its  bonds,  payable  without 
interest.  A  bank  which  wants  to  keep  itself  pre- 
pared to  issue  emergency  currency  will  keep  on 
deposit  with  the  subtreasury  as  many  of  its  notes 
fully  executed  and  ready  for  issue  as  it  may 
think  it  will  want  to  issue ;  the  Government  guar- 
anteeing the  bank  against  loss  by  any  of  its  notes 
being  improperly  issued.  The  Secretary  of  the 
Treasury  is  given  power  to  send  any  order  from 
Washington  to  the  subtreasury  at  New  York  by 
telephone  or  telegraph  that  he  could  give  by  writ- 
ing. The  City  Bank  wants  to  issue  $5,000,000 
of  its  notes  to-morrow  morning.  It  goes  to  the 
subtreasury  and  asks  for  this  amount,  and  asks 


70  VIRGINIA  BANKS  AND  BANKING 

that  $5,000,000  of  the  Government's  bonds  be 
placed  to  its  credit  as  security  for  the  notes.  The 
subtreasury  telephones  the  Secretary  of  the 
Treasury  and  asks  him  what  he  must  require  the 
City  Bank  to  put  up  as  security  to  the  Govern- 
ment for  this  loan  of  $5,000,000  of  its  bonds. 
The  Secretary  asks  him  what  securities  the  City 
Bank  can  put  up.  He  replies  that  it  can  put  up 
$5,000,000  of  Government  bonds,  and  the 
Secretary  answers  to  accept  them  and  close  the 
transaction.  Or  he  telephones  the  Secretary  that 
the  City  Bank  can  put  up  $2,000,000  of  bonds  of 
the  City  of  New  York,  $1,500,000  first  mortgage 
bonds  of  the  Pennsylvania  Railroad  Company, 
and  $1,500,000  first  mortgage  bonds  of  the  New 
York  Central  Railroad  Company.  The  Secretary 
telephones  him  to  accept  them  and  close  the  trans- 
action, and  the  City  Bank  has  $5,000,000  of 
currency  for  next  morning's  operations.  It  will 
also  be  provided  that  if  the  Government  has  to 
sell  its  bonds  to  make  the  currency  good,  they 
shall  be  converted  into  two  per  cent,  coupon 
bonds.  It  may  be  said  that  the  banks  wishing 
to  take  out  this  emergency  currency  may  not 
always  have  on  hand  such  securities  as  would  be 
satisfactory  to  the  Government.  But  the  bank 
can  always  arrange  with  the  party  wishing  to 
borrow,  for  the  use  of  a  part  of  the  collaterals  he 


PRIOR  TO  THE   CIVIL  WAR  71 

is  going  to  put  up  as  security  for  the  loan  he 
wishes  to  get.  It  is  of  no  consequence  to  that 
borrower  where  the  bank  keeps  his  securities.  It 
is  the  same  thing  to  him  whether  it  keeps  them 
in  its  vaults  or  in  the  vaults  of  the  subtreasury. 
He  is  perfectly  safe.  He  has  the  bank's  money 
and  he  will  not  return  it  until  the  bank  returns 
him  his  securities;  and  the  bank  could  have  an 
agreement  with  him  that  it  might  return  any 
other  securities  of  the  same  kind. 

But  the  currency  put  out  in  these  emergencies 
may  make  more  than  the  normal  amount  of  cur- 
rency, so  measures  should  be  taken  to  secure  its 
cancellation  when  the  emergency  is  over.  It 
should  therefore  be  provided  that  unless  this 
currency  is  returned  within  six  weeks  a  small 
tax  will  be  imposed  upon  the  bank  issuing  it. 
But  the  bank  need  not  return  the  identical  notes 
issued  in  the  emergency.  It  may  return  any  of 
its  notes  and  get  its  bonds  down.  In  these  days 
of  telephones  and  telegraphs  a  bank  can  soon 
hunt  up  as  many  of  its  notes  as  were  issued  in 
the  emergency.  Of  course  the  bank  may  convert 
this  emergency  currency  into  permanent  currency 
if  it  prefers  to  do  so  by  complying  with  the  law 
as  it  now  stands. 

These  notes  would  serve  as  a  reserve,  and  even 
in  a  panic  nine  men  in  ten  would  take  the  City 


72  VIRGINIA  BANKS  AND  BANKING 

Bank's  notes  when  calling  for  cash  because  they 
are  secured  by  government  bonds.  But  to  the 
few  that  demanded  legal  tender  the  bank  could 
offer  silver  dollars.  The  counting  and  removal 
of  these  would  soon  end  a  senseless  panic,  and  in 
this  way  the  silver  dollar  could  actually  be 
made  useful.  The  Government  should  keep 
$100,000,000  of  silver  in  the  subtreasury  at  New 
York  which  the  banks  could  always  exchange 
greenbacks  or  bank-notes  for,  returning  the  silver 
and  getting  the  notes  back. 

It  may  be  said  that  the  banks  do  not  in 
practice  pay  any  attention  to  either  of  the  two 
prohibitions  that  I  am  discussing,  but  in  the 
nature  of  the  case  they  can  not  help  paying 
attention  to  them.  Undoubtedly  they  do  lend 
below  the  legal  reserve,  and  undoubtedly  they  do 
lend  more  than  ten  per  cent,  of  their  capital  to 
one  man;  but  they  know  that  they  are  violating 
the  law  whenever  they  do  either,  and  that  a  bank 
examiner  may  come  down  upon  them  at  any 
moment  and  catch  them  in  flagrante  delicto. 

In  covertly  violating  the  law  in  this  way  they 
are  acting  very  differently  from  the  way  they 
would  act  if  left  with  a  perfectly  free  hand.  If 
perfectly  free  they  would,  in  every  case,  through 
credits  raised  on  their  books,  create  all  the  money 
that  was  wanted. 


PRIOR  TO  THE  CIVIL  WAR  73 

All  that  is  needed,  therefore,  to  make  our 
banking  system  meet  every  demand  is  to  maintain, 
the  single  standard  and  to  repeal  the  pernicious 
restrictive  provisions  of  the  National-Banking 
Act,  and  leave  the  banking  business  as  free  as  the 
hotel  business  is,  or  as  the  dry  goods  business  is, 
and  panics  will  be  ended  and  the  country  will 
have  all  the  money  it  can  possibly  use. 


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